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MarketScreener Homepage  >  Equities  >  OTC Bulletin Board - Other OTC  >  Adveco Group Inc    ADVV

ADVECO GROUP INC

(ADVV)
Delayed Quote. Delayed OTC Bulletin Board - Other OTC - 08/23 02:01:49 pm
2.45 USD   +2.08%
01/23ADVECO : Appoints National Accounts Manager
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01/17ADVECO : m-CHP System for Bromsgrove Leisure Centre Shortlisted for Renewable Project of the Year Award
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ADVECO : MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (form 10-Q)

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05/15/2019 | 02:17pm EDT

The following management's discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. Our financial statements are prepared in U.S. dollars and in accordance with U.S. GAAP.

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements. We use words such as "believe," "expect," "anticipate," "project," "target," "plan," "optimistic," "intend," "aim," "will" or similar expressions which are intended to identify forward-looking statements. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.



Overview


ADVECO GROUP INC. ("the Company") was incorporated under the laws of the State of Nevada, U.S. on September 20, 2016. The Company did not have operations that generated revenues and positive cash flows; however, the Company's management has been reviewing investment opportunities.

On March 22, 2018, the Company filed a Certificate of Amendment with the State of Nevada to increase its authorized shares to 2,000,000,000.

On May 9, 2018, the Company entered into share exchange agreement by and among Sunny Taste Group Inc. ("STGI") and its shareholders: 1.) Zhang Hua, 2.) Chen Hao Development Co., Ltd. and 3.) Shengjie Development Co., Ltd. whereby the Company newly issued 427,568,548 shares of its common stock in exchange for all the outstanding shares in STGI. This transaction has been accounted for a reverse takeover transaction and a recapitalization of the Company whereby the Company, the legal acquirer, is the accounting acquiree, and STGI, the legal acquiree, is the accounting acquirer.

Sunny Taste Group Inc. ("STGI") is a limited company incorporated in the British Virgin Islands on August 24, 2017. The Company is an investment holding company. Its primary business activities are conducted through its wholly owned subsidiaries in the Hubei province in the People's Republic of China ("PRC"). The Company primarily grows and sells a variety of agricultural products to local customers.

Sunny Taste International Development Co., Ltd. ("STID") is a limited company incorporated in the British Virgin Islands on August 24, 2017. It is wholly owned subsidiary of STGI.

Sunny Taste (Hong Kong) Co., Limited ("STHK") was incorporated on September 2, 2016 in Hong Kong with limited liability. It is a wholly owned subsidiary of STID.




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On November 1, 2017Jingmen Wingspread Agriculture Company Limited ("JWAC") was incorporated as wholly owned foreign entity in the PRC. It is a wholly owned subsidiary of STHK.

Hubei Chenyuhui Agriculture Technology Company Limited ("HCAT") was incorporated on October 30, 2012. It was acquired by JWAC on or about March 30, 2018; accordingly, HCAT became a wholly owned subsidiary of JWAC.

On April 28, 2017, HCAT registered Hubei Hongxintai Agriculture Company Limited. ("HHXT") as a branch office.



Results of Operations


Comparison of Three Months Ended March 31, 2019 and 2018



Revenues


During the three-month period ended March 31, 2019, we have generated $342,880 in revenue compared to that of $84,596 during the three-month period ended March 31, 2018.




Cost of Revenues



We have incurred $260,912 and $62,527 in cost of revenues for the three months ended March 31, 2019 and 2018, respectively.

Selling and Marketing Expenses

During the three months ended March 31, 2019, we have incurred $257,079 in selling and marketing expenses compared to that of $67,465 during the three months ended March 31, 2018. The selling and marketing expenses primarily consisted of salary expenses, advertisement expenses and depreciation.

General and Administrative Expenses

During the three months ended March 31, 2019, we have incurred $739,917 in general and administrative expenses compared to that of $553,921 during the three months ended March 31, 2018. The general and administrative expenses mainly consisted of salary expenses, bad debt expenses and commissions.



Net Loss


Our net loss for the three months ended March 31, 2019 was $908,619 compared to that of $607,000 for the three months ended March 31, 2018.

Liquidity and Capital Resources



                                         March 31,       December 31,
Working capital                            2019              2018
Total current assets                   $   2,000,353$   1,127,648
Total current liabilities                 20,943,402        18,558,803

Working capital surplus/(deficiency) $ (18,943,049 )$ (17,431,155 )

Total stockholders' deficit for the three-month period ended March 31, 2019 and the year ended December 31, 2018 was $(10,237,453) and $(9,106,972), respectively. To date, we have financed our operations primarily from either advancements or the issuance of equity and debt instruments.

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business.




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Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next three months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially limit our business operations.




                                                       Three Months Ended March 31,
                                                           2019                2018
Net cash used in operating activities                $     (1,213,794 )$ (402,074 )
Net cash used in investing activities                        (249,755 )       (494,157 )
Net cash provided by financing activities                   1,490,843          780,217
Net increase (decrease) in cash and cash
equivalents                                                    27,294         (116,014 )

Effect on foreign currency translation on cash and cash equivalents

                                                  919            1,249
Cash and cash equivalents at the beginning of
period                                                         33,340          155,244

Cash and cash equivalents at the end of period $ 61,553 $ 40,479




Operating Activities


For the three months ended March 31, 2019, net cash used in operating activities was $1,213,794 consisting of a net loss of $908,619, amortization and depreciation expenses of $74,397, an increase in accounts and other receivables of $85,492, an increase in inventory of $195,467, an increase in prepayments and other current assets of $546,096 and an increase in payables and other current liabilities of $447,483. Net cash used in operating activities for the three-month period ended March 31, 2018 was $402,074 consisting of a net loss of $607,000, amortization and depreciation expenses of $55,543, a decrease in accounts and other receivables of $398,563, an increase in inventory of $110,151, an increase in prepayments and other current assets of $252,937 and an increase in payables and other current liabilities of $113,908.



Investing Activities


Net cash used in by investing activities for the three-month period ended March 31, 2019 was $249,755 consisting of purchases of plant and equipment and construction in progress of $236,774 and intangible assets of $12,981. Net cash used in purchasing fixed assets for the three-month period ended March 31, 2018 was $494,157 for purchases of plant and equipment and construction in progress.



Financing Activities


Net cash provided by financing activities for the three-month period ended March 31, 2019 was $1,490,843 consisting of a repayment of borrowings of $59,275 and an increase in related party balances of $1,550,118. Net cash provided by financing activities for the three-month period ended March 31, 2018 was $780,217 consisting of a repayment of borrowings of $223,746 and an increase in related party balances of $1,003,963.



Inflation


Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in our industry and continually maintain effective cost control in operations.




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Off Balance Sheet Arrangements

We do not have any 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 or capital expenditures or capital resources that is material to an investor in our securities.




Critical Accounting Policies



Method of accounting


Management has prepared the accompanying financial statements and these notes in accordance to generally accepted accounting principles in the United States of America; the Company maintains its general ledger and journals with the accrual method accounting.



Use of estimates


The preparation of the financial statements 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 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 the estimates are made; however, actual results could differ materially from those estimates.



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. The Company's typically applies a salvage value of 0% to 10%. The estimated useful lives of the plant and equipment are as follows:



Landscaping, plant and tree   1-3 years
Machinery and equipment       5-10 years




The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss are included in the Company's results of operations. The costs of maintenance and repairs are recognized to expenses as incurred; significant renewals and betterments are capitalized.




Intangible assets



Intangible assets are carried at cost less accumulated amortization. Amortization is provided over their useful lives, using the straight-line method. The estimated useful lives of the intangible assets are as follows:



Land use rights     20-40 years
Software licenses   5-10 years
Trademarks          20-40 years





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Foreign currency translation



The accompanying financial statements are presented in United States dollars. The functional currencies of the Company are in Renminbi (RMB). The Company's assets and liabilities are translated into United States dollars from RMB at year-end exchange rates, and its revenues and expenses are translated at the average exchange rate during the year. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.




                                          2019         2018
Year end RMB: US$ exchange rate           6.7111       6.8764

Annual average RMB: US$ exchange rate 6.7482 6.6146

The RMB is not freely convertible into foreign currencies and all foreign exchange transactions must be conducted through authorized financial institutions.




Revenue recognition



The Company recognizes revenue when all the following criteria have been met: it has negotiated the terms of the transaction with the customer which includes setting a fixed sales price; it has transferred of possession of the product to the customer; the customer does not have the right to return the product; the customer is able to further sell or transfer the product onto others for economic benefit without any other obligation to be fulfilled by the Company; and the Company is reasonably assured that funds have been or will be collected from the customer. The Company's the amount of revenue recognized to the books reflects the value of goods invoiced, net of any value-added tax (VAT) or excise tax.

Recent accounting pronouncements

In January 2017, the FASB issued guidance which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value, determined in Step 1. The Company is currently evaluating the impact on the financial statements of this guidance.

In January 2017, the FASB amended the existing accounting standards for business combinations. The amendments clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company is currently evaluating the impact on the financial statements of this guidance.

In November 2016, the FASB issued guidance, which addresses the presentation of restricted cash in the statement of cash flows. The guidance requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.

In October 2016, the FASB issued guidance, which amends the existing accounting for Intra-Entity Transfers of Assets Other Than Inventory. The guidance requires an entity to recognize the income tax consequences of intra-entity transfers, other than inventory, when the transfer occurs The Company is currently evaluating the timing and the impact of this guidance on the financial statements.

In August 2016, the FASB issued guidance, which amends the existing accounting standards for the classification of certain cash receipts and cash payments on the statement of cash flows. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.

In June 2016, the FASB issued guidance, which requires credit losses on financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, not based on incurred losses. Further, credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses limited to the amount by which fair value is below amortized cost. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.

In February 2016, the FASB issued guidance, which amends the existing accounting standards for leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification. Under the new guidance, a lessee will be required to recognize assets and liabilities for all leases with lease terms of more than twelve months. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.




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In January 2016, the FASB issued guidance, which amends the existing accounting standards for the recognition and measurement of financial assets and financial liabilities. The updated guidance primarily addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.

© Edgar Online, source Glimpses

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Managers
NameTitle
Hong Bo Jia Chief Executive & Operating Officer
Wa Cheung Chairman
Zhilei Yan Chief Financial Officer & Secretary
Desheng Chen Director
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