JIALIJIA GROUP CORPORATION LIMITED The following discussion of our financial condition and results of operations should also be read in conjunction with our unaudited consolidated financial statements and the notes to those financial statements appearing elsewhere in this report. The following discussion contains forward-looking statements relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
Overview
On
Pursuant to the Exchange Agreement, among other matters, the Shareholder will sell and transfer all of the Huazhongyun Shares in exchange for all of the Company Shares. As a result, the Shareholder will directly own the Company Shares, which represent approximately 82% of the issued and outstanding shares of the Company's common stock at the time of execution of the Exchange Agreement and Huazhongyun will become a wholly-owned subsidiary of the Company.
On
Pursuant to the Exchange Agreement, on
The acquisition of Huazhongyun and WFOE is treated as a reverse merger (the
"Reverse Merger") for accounting purposes. As a result of the consummation of
the Reverse Merger on
Results of Operations for the Three and Nine Months Ended
Revenues
The Company did not engage in any business activities and did not generate any
revenue for the nine months ended
12
Operating Expenses
The Company has had nominal operations and only incurred expenses relating to
being a public reporting company and seeking a merger and acquisition. The
general and administrative expenses consisted primarily of professional fees and
organization expenses. For the three months ended
Net Loss
As a result of the foregoing, for the three months ended
Liquidity and Capital Resources
Working Capital:
As of
Cash Flows:
Net cash used in operating activities was
Net cash used in investing activities was
Net cash provided by financing activities was
Going Concern
These consolidated financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. As reflected in
the Company's accompanying consolidated financial statements, for the nine
months ended
If the Company is unable to successfully commence its business operations in a short period of time, or unable to raise additional capital or secure additional lending, the Company may need to curtail or cease its operations. The Company believes that these matters raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments relating 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.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management plans to obtain such resources for the Company include obtaining capital from the sale of its equity, and short-term and long-term borrowings from banks, stockholders or other related party(ies). However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
13
Critical Accounting Policies
Basis of Accounting
The financial statements and accompanying notes are prepared in accordance with
accounting principles generally accepted in
Principles of consolidation
The consolidated financial statements include the financial statements of
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in
Cash and Cash Equivalents
The Company considers all cash on hand and in banks, certificates of deposit with banks and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. There is no insurance securing these deposits in the PRC. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.
Advances to Suppliers
The Company advances funds to certain suppliers for the purchase of machinery and equipment. Based on management's evaluation, no allowance for advances to suppliers is required at the balance sheet dates.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the year of disposal. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:
Estimated
Useful
Life
Buildings 20 years
Machinery and equipment 10 years
Office equipment 5 years
Vehicles 5 years
Costs incurred in constructing new facilities, including progress payments and other costs related to construction, are capitalized and transferred to property, plant and equipment on completion, at which time depreciation commences.
14
Impairment of Long-lived Assets
The Company evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable through the estimated undiscounted cash flows expected to result
from the use and eventual disposition of the assets. Whenever any such
impairment exists, an impairment loss will be recognized for the amount by which
the carrying value exceeds the fair value. There was no impairment reassessed
and recorded by the management for the nine months ended
Impairment ofGoodwill
Income Taxes
The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of 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 deductibility is uncertain.
Under ASC 740, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. 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 litigations 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 likely 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. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred.
Foreign Currency Translation
The Company uses
Fair Values of Financial Instruments
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in active markets for identical assets or liabilities.
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
15
The Company's financial instruments primarily consist of cash and cash equivalents, other receivables, advances to suppliers, accrued expenses, other payables, and related party borrowings. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.
Recent Accounting Pronouncements
In
Off-balance Sheet Arrangements
As of
© Edgar Online, source
