| 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
Nice
Great International Limited (1) Hong Kong 100 HKD 100
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:
For the three months and year ended, (Average Rate) Mar. 31, 2018 Dec 31, 2017 Mar. 31, 2017
Chinese Renminbi (RMB) RMB 6.35819 RMB 6.75690 RMB 6.88912
United States dollar ($) $ 1.00000 $ 1.00000 $ 1.00000
As of (Closing Rate) Mar. 31, 2018 Dec 31, 2017 Mar. 31, 2017
Chinese Renminbi (RMB) RMB 6.28068 RMB 6.50630 RMB 6.89116
United States dollar ($) $ 1.00000 $ 1.00000 $ 1.00000
For the three months and year ended, (Average Rate) Mar. 31, 2018 Dec 31, 2017 Mar. 31, 2017
Hong Kong (HKD) HKD 7.82750 HKD 7.79259 HKD 7.76056
United States dollar ($) $ 1.0000 $ 1.00000 $ 1.00000
As of (Closing Rate) Mar. 31, 2018 Dec 31, 2017 Mar. 31, 2017
Hong Kong (HKD) HKD 7.84906 HKD 7.81280 HKD 7.77069
United States dollar ($) $ 1.00000 $ 1.00000 $ 1.00000 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 issued accounting guidance FASB
Simplifies Adoption of New Leases Standard for Certain Land Easements. Leases (Topic 842):Land Easement Practical Expedient for Transition to Topic 842, ASU
2018-01 is expected to reduce the cost of adopting the new leases standard for certain land easements. It is also an attempt to
help ensure that companies can make a successful transition to the standard without compromising the quality of information provided
to investors about these transactions. Land
easements (also commonly referred to as rights of way) represent the right to use, access, or cross another entitys land
for a specified purpose. Land easements are used by utility and telecommunications companies, for example, when they need to take
a small strip of land, or easement, to bury wires. Not all companies have historically accounted for them as leases. Stakeholders
pointed out that the requirement to evaluate all old and existing land easements, sometimes numbering in the tens of thousands,
to determine if they meet the definition of a lease under the new standard could be very costly. They also noted there would be
limited benefit to applying this requirement, as many of their land easements would not meet the definition of a lease, or even
if they met that definition, many of their easements are prepaid and, therefore, already are recognized on the balance sheet. The
land easements ASU addresses this by:
· Providing
an optional transition practical expedient that, if elected, would not require an organization to reconsider their accounting
for existing land easements that are not currently accounted for under the old leases standard; and
· Clarifying
that new or modified land easements should be evaluated under the new leases standard, once an entity has adopted the new
standard. The
FASB issued an Accounting Standards Update (ASU) that helps organizations address certain stranded income tax effects in accumulated
other comprehensive income (AOCI) resulting from the Tax Cuts and Jobs Act. ASU
No. 2018-02, Income StatementReporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income, provides financial statement preparers with an option to reclassify stranded tax effects within AOCI
to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax
Cuts and Jobs Act (or portion thereof) is recorded. The
ASU requires financial statement preparers to disclose:
· A
description of the accounting policy for releasing income tax effects from AOCI;
· Whether
they elect to reclassify the stranded income tax effects from the Tax Cuts and Jobs Act; and
· Information
about the other income tax effects that are reclassified. The
amendments affect any organization that is required to apply the provisions of Topic 220, Income StatementReporting Comprehensive
Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income
as required by GAAP. The
amendments are effective for all organizations for fiscal years beginning after December 15, 2018, and interim periods within
those fiscal years. Early adoption is permitted. Organizations should apply the proposed amendments 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. FASB
Issues Corrections and Improvements to Financial Instruments Technical Corrections and Improvements to Financial InstrumentsOverall (Subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities, Financial InstrumentsOverall
(Subtopic 825-10)
· Issue
1: Equity Securities without a Readily Determinable Fair Value Discontinuation. The amendment clarifies that an entity
measuring an equity security using the measurement alternative may change its measurement approach to a fair value method
in accordance with Topic 820,Fair Value Measurement, through an irrevocable election that would apply to that security and
all identical or similar investments of the same issuer. Once an entity makes this election, the entity should measure all
future purchases of identical or similar investments of the same issuer using a fair value method in accordance with Topic
820.
· Issue
2: Equity Securities without a Readily Determinable Fair Value Adjustments. The amendment clarifies that the adjustments
made under the measurement alternative are intended to reflect the fair value of the security as of the date that the observable
transaction for a similar security took place.
· Issue
3: Forward Contracts and Purchased Options. The amendment clarifies that remeasuring the entire value of forward contracts
and purchased options is required when observable transactions occur on the underlying equity securities.
· Issue
4: Presentation Requirements for Certain Fair Value Option Liabilities. The amendment clarifies that when the fair value option
is elected for a financial liability, the guidance in paragraph 825-10- 45-5 should be applied, regardless of whether the
fair value option was elected under either Subtopic 815-15,Derivatives and Hedging Embedded Derivatives, or 825-10,Financial
Instruments Overall.
· Issue
5: Fair Value Option Liabilities Denominated in a Foreign Currency. The amendments clarify that for financial liabilities
for which the fair value option is elected, the amount of change in fair value that relates to the instrument-specific credit
risk should first be measured in the currency of denomination when presented separately from the total change in fair value
of the financial liability. Then, both components of the change in the fair value of the liability should be remeasured into
the functional currency of the reporting entity using end-of-period spot rates.
· Issue
6: Transition Guidance for Equity Securities without a Readily Determinable Fair Value. The amendment clarifies that the prospective
transition approach for equity securities without a readily determinable fair value in the amendments in ASU No. 2016-01 is
meant only for instances in which the measurement alternative is applied. An insurance entity subject to the guidance in Topic
944,Financial Services Insurance, should apply a prospective transition method when applying the amendments related
to equity securities without readily determinable fair values. An insurance entity should apply the selected prospective transition
method consistently to the entitys entire population of equity securities for which the measurement alternative is
elected. For
public business entities, ASU 2018-03 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 ASU 2018-03 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 ASU 2016-01. For all other entities, the effective date is the same as the effective date in
ASU 2016-01. All
entities may early adopt ASU 2018-03 for fiscal years beginning after December 15, 2017, including interim periods within those
fiscal years, as long as they have adopted ASU 2016-01. FASB
Adds SEC Guidance to the Codification on the Tax Cuts and Jobs Act. Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. Tax
Cuts and Jobs Act ASU
2018-05 adds the following guidance, among other things, to the FASB Accounting Standards Codification regarding the Act:
· Question
1:If the accounting for certain income tax effects of the Act is not completed by the time a company issues its financial
statements that include the reporting period in which the Act was enacted, what amounts should a company include in its financial
statements for those income tax effects for which the accounting under Topic 740 is incomplete?
· Answer
1:In a companys financial statements that include the reporting period in which the Act was enacted, a company must
first reflect the income tax effects of the Act in which the accounting under Topic 740 is complete. These completed amounts
would not be provisional amounts. The company would then also report provisional amounts for those specific income tax effects
of the Act for which the accounting under Topic 740 will be incomplete but a reasonable estimate can be determined. For any
specific income tax effects of the Act for which a reasonable estimate cannot be determined, the company would not report
provisional amounts and would continue to apply Topic 740 based on the provisions of the tax laws that were in effect immediately
prior to the Act being enacted. For those income tax effects for which a company was not able to determine a reasonable estimate
(such that no related provisional amount was reported for the reporting period in which the Act was enacted), the company
would report provisional amounts in the first reporting period in which a reasonable estimate can be determined.
· Question
2: If an entity accounts for certain income tax effects of the Act under a measurement period approach, what disclosures should
be provided?
· Answer 2: The
staff believes an entity should include financial statement disclosures to provide information about the material financial
reporting impacts of the Act for which the accounting under Topic 740 is incomplete, including:
a) Qualitative disclosures
of the income tax effects of the Act for which the accounting is incomplete;
b) Disclosures of items
reported as provisional amounts;
c) Disclosures of existing
current or deferred tax amounts for which the income tax effects of the Act have not been completed;
d) The reason why the
initial accounting is incomplete;
e) The additional information
that is needed to be obtained, prepared, or analyzed in order to complete the accounting requirements under Topic 740;
f) The nature and amount
of any measurement period adjustments recognized during the reporting period;
g) The effect of measurement
period adjustments on the effective tax rate; and
h) When the accounting
for the income tax effects of the Act has been completed. ASU
2018-05 is effective upon inclusion in the FASB Codification. (l)
Account receivable 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 an bad debts of $73,187. 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 three
months ended March 31, 2018 and 2017 were $16,572 and $18,234, 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 $8,107
and $7,544 for the three months ended March 31, 2018 and 2017 respectively. Advertising expense is included in selling expense
in the accompanying consolidated statements of income. (s)
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)
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 $7,455 and $8,845 for the three months ended March 31, 2018
and 2017, respectively. (u)
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)
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)
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. |
