| NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | (a)
Method of Accounting The
Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The consolidated
financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally
accepted accounting principles in the United States of America and have been consistently applied in the presentation of consolidated
financial statements. (b)
Principles of consolidation The
consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiary. All
significant inter-company balances and transactions are eliminated in consolidation. The
following table depicts the identity of the subsidiary:
Name
of Subsidiary Place
of Incorporation Attributable
Equity Interest % Registered
Capital
Yugosu
Investment Limited (1) Hong
Kong 100 HKD 10,000
Guangzhou
Sleepaid Household Supplies Co., Ltd. (2) PRC 100 RMB 3,000,000
Yuewin
Trading Ltd (3) PRC 100 RMB 500,000
Note: (1) Wholly owned subsidiary
of Sleepaid Holding Company
(2) Wholly owned subsidiary
of Yugosu Investment Limited
(3) Wholly owned subsidiary
of Sleepaid Household (c) Use of estimates The
preparation of consolidated financial statements that conform with generally accepted accounting principles in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at
the time, however, actual results could differ materially from those estimates. (d)
Economic and political risks The
Companys operations are conducted in Hong Kong and China and a large number of customers are located in Southern China.
Accordingly, the Companys business, financial condition and results of operations may be influenced by the political, economic
and legal environment in Hong Kong and China, and by the general state of the economy in Hong Kong and China. The
Companys operations and customers in Hong Kong and Southern China are subject to special considerations and significant
risks not typically associated with companies in North America and Western Europe. These include risks associated with, among
others, the political, economic and legal environments, and foreign currency exchange. The Companys results may be adversely
affected by changes in the political and social conditions in Hong Kong and China, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of
taxation, among other things. (e)
Property, plant and equipment Plant
and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using
the straight-line method with 5% scrape value. Estimated
useful lives of the plant and equipment are as follows:
Furniture
and fixtures 5 years
Office
equipment 2 - 5 years
Motor
vehicles 4 - 5 years The
cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or
loss is included in the statement of operation. (f)
Accounting for the impairment of long-lived assets The
Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject
to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in ASC No. 360. The
carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately
identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying
value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in
a similar manner, except that fair market values are reduced for the cost to dispose. During
the reporting periods, there was no impairment loss. (g)
Cash and concentration of risk The
Group considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
The Group maintains bank accounts in HK and the PRC. (h)
Income taxes The
Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future
years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before
the Company is able to realize their benefits, or that future realization is uncertain. (i)
Foreign currency translation The
accompanying consolidated financial statements are presented in United States dollars (USD). The functional currencies of the
Companys operating business based in Hong Kong and PRC are the Hong Kong Dollar (HKD) and Renminbi (RMB) respectively.
The consolidated financial statements are translated into USD from HKD and RMB at period-end exchange rates as to assets and liabilities
and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when
the capital transactions occurred.. The
exchange rates used to translate amounts in HK$ and RMB into USD for the purposes of preparing the consolidated financial statements
were as follows:
6/30/2017 12/31/2016 6/30/2016
Six
months and Year end HKD: USD exchange rate 7.8059 7.7565 7.7589
Average
period and yearly HKD: USD exchange rate 7.7734 7.7622 7.7675
6/30/2017 12/31/2016 6/30/2016
Six
months and Year end RMB: USD exchange rate 6.7774 6.9557 6.6443
Average
period and yearly RMB: USD exchange rate 6.8752 6.6433 6.5364 The
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions.
No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.
In addition, the current foreign exchange control policies applicable in PRC also restrict the transfer of assets or dividends
outside the PRC. (j)
Comprehensive income Comprehensive
income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.
Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive
income are required to be reported in a financial statement that is presented with the same prominence as other consolidated financial
statements. The Companys current component of comprehensive income is the net income and foreign currency translation adjustment. (k)
Recently implemented standards The
FASB has issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a
Business The
definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The
amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions
(or disposals) of assets or businesses. The amendments provide a more robust framework to use in determining when a set of assets
and activities is a business. They also provide more consistency in applying the guidance, reduce the costs of application, and
make the definition of a business more operable. For
public companies, the amendments are effective for annual periods beginning after December 15, 2017, including interim periods
within those periods. For all other companies and organizations, the amendments are effective for annual periods beginning after
December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The
FASB has issued Accounting Standards Update No. 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined
Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting The
amendments are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The amendments should
be applied retrospectively to each period for which financial statements are presented. The amendments apply to reporting entities
within the scope of Topic 960, Plan Accounting - Defined Benefit Pension Plans, Topic 962, Plan Accounting - Defined Contribution
Pension Plans, or Topic 965, Plan Accounting - Health and Welfare Benefit Plans. Under
Topic 960, investments in master trusts are presented in a single line item in the statement of net assets available for benefits.
Similar guidance is not provided in Topic 962 or 965, which has resulted in diversity in practice. For each master trust in which
a plan holds an interest, the amendments require a plans interest in that master trust and any change in that interest
to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in
net assets available for benefits, respectively. Topics
960 and 962 require plans to disclose their percentage interest in the master trust and a list of the investments held by the
master trust, presented by general type, within the plans financial statements. The amendments remove the requirement to
disclose the percentage interest in the master trust for plans with divided interests and require that all plans disclose the
dollar amount of their interest in each of those general types of investments. Current
U.S. GAAP does not require disclosure by plans of the master trusts other assets and liabilities. Examples of those balances
include amounts due from brokers for securities sold, amounts due to brokers for securities purchased, accrued interest and dividends,
and accrued expenses. The amendments require all plans to disclose: (a) their master trusts other asset and liability balances;
and (b) the dollar amount of the plans interest in each of those balances. Lastly,
investment disclosures (e.g., those required by Topics 815 and 820) relating to 401(h) account assets are generally provided in
both the defined benefit pension plan financial statements and the health and welfare benefit plan financial statements. Stakeholders
noted that the disclosures are redundant. The amendments remove that redundancy and do not require that the investment disclosures
relating to the 401(h) account assets be provided in the health and welfare benefit plans financial statements. The amendments
will require the health and welfare benefit plan to disclose the name of the defined benefit pension plan in which those investment
disclosures are provided, so that participants can easily access those statements for information about the 401(h) account assets,
if needed. The
FASB has issued Accounting Standards Update (ASU) No. 2017-07, Compensation Retirement Benefits (Topic 715): Improving
the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost Compensation Retirement Benefits The
amendments require that an employer report the service cost component in the same line item or items as other compensation costs
arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required
to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations,
if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line
item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the
income statement to present the other components of net benefit cost must be disclosed. The
amendments also allow only the service cost component to be eligible for capitalization when applicable (e.g., as a cost of internally
manufactured inventory or a self-constructed asset).
The
amendments are effective for public business entities for annual periods beginning after December 15, 2017, including interim
periods within those annual periods. For other entities, the amendments are effective for annual periods beginning after December
15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted as of the beginning
of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. (l)
Account receivable The
Company is operating retail outlet stores in a cash or credit environment which rent space from various shopping malls controlling
by the shopping mall owners. All customers pay for their purchases at the cashier counters operating by the owners. Upon confirmation
of the transaction by the shopping mall, the shopping mall deducts the sales tax due to the government, the sales portion due
to the shopping mall and remits the balance to the Company. It typically takes the shopping mall approximately 30 to 45 days to
confirm the transaction, and settles net proceeds within the next 45 days. The Companys accounts receivable are the receivables
due from the shopping malls for the sale of the products for which the shopping mall owner collected the payments from the customers
and are holding to remit to the Company. Accounts
receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance
for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables
are past due, significant one-time events and historical experience. Management reviews and adjusts this allowance periodically
based on historical experience and its evaluation of the collectability of outstanding accounts receivable. The Company evaluates
the credit risk of its customers utilizing historical data and estimates of future performance. Bad debts are written off as incurred.
During the reporting years, there were no bad debts occurred. Outstanding
accounts balances are reviewed individually for collectability. The Company does not charge any interest income on trade receivables.
Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for
recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection. (m)
Inventories Inventories
primarily consist of merchandise inventories and are stated at lower of cost or market and net realizable value. Cost of inventories
is calculated on the weighted average basis which approximates cost. Management
regularly reviews inventories and records valuation reserves for damaged and defective returns, inventories with slow-moving or
obsolescence exposure and inventories with carrying value that exceeds market value. Because of its product mix, the Company has
not historically experienced significant occurrences of obsolescence. Inventory
shrinkage is accrued as a percentage of revenues based on historical inventory shrinkage trends. The Company performs physical
inventory count of its stores once per quarter and cycle counts inventories at its distribution centers once per quarter throughout
the year. The reserve for inventory shrinkage represents an estimate for inventory shrinkage for each store since the last physical
inventory date through the reporting date. These
reserves are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic
conditions, consumer demand and competitive environments differ from expectations. (n)
Revenue recognition The
Company earns revenue by selling merchandise through self-managed retail stores inside shopping malls, franchise stores and wholesale
agent. Revenue
from self-managed retail stores inside shopping malls is recognized when merchandise is purchased by and delivered to the customer,
confirmed, fixed and reconciled with the shopping malls and collectability is reasonably assured. Revenue
from franchised stores is recognized after goods delivered and cash collected (normally cash on delivery) from the franchise retail
stores. Revenue
from wholesale agent is recognized after goods delivered, amount fixed or determined and collectability is reasonably assured. All
revenues are shown net of estimated returns during the relevant period represented by estimated allowance for sales returns based
upon historical experience. The
Company records sales tax collected from its customers on a net basis, and therefore excludes it from revenue as defined in ASC
605, Revenue Recognition. (o)
Cost of sales Cost
of sales includes the cost of merchandise, collecting and handling charges based on store sales deducted by landlord, related
cost of packaging and shipping cost and the distribution center costs. (p)
Operating lease rental The
Company did not have a lease that met the criteria of a capital lease. Leases that do not qualify as a capital lease are classified
as an operating lease. Operating lease rental expenses included in selling, general and administrative expenses for the six months
ended June 30, 2017 and 2016 were $35,777 and $33,907, respectively (q)
Selling expenses Selling
expenses include store-related expense, other than store occupancy costs, as well as advertising, depreciation and amortization,
and certain expenses associated with operating the Companys corporate headquarters. (r)
Advertising costs The
Company expensed all advertising costs as incurred. Advertising expenses, net of reimbursement from suppliers, amounted to $8,663
and $21,881 for the six months ended June 30, 2017 and 2016 respectively. Advertising expense is included in selling, general
and administrative expense in the accompanying consolidated statements of income. (s)
Concentration of Credit Risk The
Company maintains cash in bank deposit accounts in Hong Kong and PRC. The Company performs ongoing evaluations of this institution
to limit its concentration risk exposure. The
Company operates retail stores located in the PRC. Because of this, the Company is subject to regional risks, such as the economy,
regional financial conditions and unemployment, weather conditions, power outages, and other natural disasters specific to the
region in which the Company operates. (t)
Retirement Benefit Plans Full
time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain
pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations
require the Company to make contributions to the government for these benefits based on certain percentages of the employees
salaries. The Company accounts the mandated defined contribution plan under the vested benefit obligations approach based on the
guidance of ASC 715, CompensationRetirement Benefits. The
total amounts for such employee benefits which were expensed were $14,747 and $21,277 for the six months ended June 30, 2017 and
2016, respectively. (u)
Segment reporting In
accordance with ASC 280-10, Segment Reporting (ASC 280-10), the Companys chief operating decision makers
rely upon consolidated results of operations when making decisions about allocating resources and assessing performance of the
Company. As a result of the assessment made by the chief operating decision makers, the Company has only one single operating
and geographic segment. The Company does not distinguish between markets or segments for the purpose of internal reporting (v)
Product warranty The
company is the legal obligor for the warranties of the products sold to customers but believed that the likelihood that we would
not recover all warranty costs from the manufacturer to be remote based on our past operating history, manufacturers cooperation
and their reputation and history of honoring all their warranty obligations. Since our inception to present, we have not incurred
any direct warranty expenses and accordingly, the accrual and associated expenses recognized in the financial statements has been
recorded as zero. (w)
Basic and diluted earnings (loss) per share In accordance
with ASC No. 260 (formerly SFAS No. 128), Earnings Per Share, the basic earnings (loss) per common share is computed
by dividing net earnings (loss) available to common stockholders by the weighted average number of common shares outstanding.
Diluted earnings (loss) per common share is computed similarly to basic earnings (loss) per common share, except that the denominator
is increased to include the number of additional common shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive. |
