11 Table of Contents Forward Looking Statements
Some of the statements contained in this Form 10-K that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 10-K, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties, and other factors affecting our operations, market growth, services, products, and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:
1. Our ability to attract and retain management and key employees;
2. Our ability to generate customer demand for our products;
3. The intensity of competition; and
4. General economic conditions.
All written and oral forward-looking statements made in connection with this Form 10-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.
Overview Description of Business General Information
On or about
During the year ended
On
12 Table of Contents
We have never been a party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger, consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.
General Business Overview
We market and distribute skin care products manufactured by
The skin care products that we will distribute are designed to address various skin care needs. Those products include moisturizers, serums, cleansers, toners, body care, exfoliators, acne and oil correctors, facial masks, cleansing devices and sun care products. A number of those products are developed for use on particular areas of the body, such as the face or hands or around the eyes.
We believe the Company, together with its subsidiaries, distributes highly
innovative personal care products and ecologically friendly cleaning products in
In
We commenced the sales and distribution of Calibrators in
In addition, we provided inventory, membership and business management software
that designed by
Critical Accounting Policies and Estimates
Principles of Consolidation
The accompanying consolidated financial statements, including the accounts of
13 Table of Contents
The functional currency of the subsidiaries in
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in
Classification
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net income nor retained earnings.
Cash and Cash Equivalents
Cash and cash equivalents include cash and all highly liquid instruments with original maturities of three months or less.
Accounts Receivable
Accounts receivable are stated at carrying value less estimates made for doubtful receivables. An allowance for impairment of trade receivables is established if the collection of a receivable becomes doubtful. Such receivable becomes doubtful when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. An impairment loss is recognized in the statement of income, as are subsequent recoveries of previous impairments.
Inventory
Inventory is stated at the lower of cost and net realizable value. Net realizable value (NRV) is defined as estimated selling prices less costs of completion, disposal, and transportation. Inventory consists mainly of finished goods held for resale. Cost is determined on a weighted average cost method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and incurs a charge to operations for known and anticipated inventory obsolescence.
Property and Equipment
Property and equipment is carried at cost net of accumulated depreciation.
Repairs and maintenance are expensed as incurred. Expenditures that improve the
functionality of the related asset or extend the useful life are capitalized.
When property and equipment is retired or otherwise disposed of, the related
gain or loss is included in operating income. Leasehold improvements are
depreciated on the straight-line method over the shorter of the remaining lease
term or estimated useful life of the asset. Depreciation is calculated on the
straight-line method, including property and equipment under capital leases,
generally is five years. Depreciation expense is
14 Table of Contents
Impairment of Long-Lived Assets
The Company has adopted Accounting Standards Codification subtopic 360-10,
Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that
long-lived assets and certain identifiable intangibles held and used by the
Company be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company evaluates its long-lived assets for impairment annually or more often if
events and circumstances warrant. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a
forecasted inability to achieve breakeven operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based upon
forecasted undiscounted cash flows. Should impairment in value be indicated, the
carrying value of intangible assets will be adjusted, based on estimates of
future discounted cash flows resulting from the use and ultimate disposition of
the asset. ASC 360-10 also requires assets to be disposed of be reported at the
lower of the carrying amount or the fair value less costs to sell. Management
has determined that no impairments of long-lived assets currently exist as of
Long-term Equity Investment
The Company acquires equity investment to promote business and strategic objectives. The Company accounts for non-marketable equity and other equity investments for which the Company does not have control over the investees as:
· Equity method investments when the Company has the ability to exercise significant influence, but not control, over the investee. Its proportionate share of the income or loss is recognized monthly and is recorded in gain (loss) on equity investments. · Non-marketable cost method investments when the equity method does not apply.
Significant judgment is required to identify whether an impairment exists in the valuation of the Company's non-marketable equity investments, and therefore the Company considers this a critical accounting estimate. Its yearly analysis considers both qualitative and quantitative factors that may have a significant impact on the investee's fair value. Qualitative analysis of its investments involves understanding the financial performance and near-term prospects of the investee, changes in general market conditions in the investee's industry or geographic area, and the management and governance structure of the investee. Quantitative assessments of the fair value of its investments are developed using the market and income approaches. The market approach includes the use of comparable financial metrics of private and public companies and recent financing rounds. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding the investees' revenue, costs, and discount rates. The Company's assessment of these factors in determining whether an impairment exists could change in the future due to new developments or changes in applied assumptions.
15 Table of Contents
Other-Than-Temporary Impairment
The Company's long-term equity investments are subject to a periodic impairment review. Impairments affect earnings as follows:
· Marketable equity securities include the consideration of general market conditions, the duration and extent to which the fair value is below cost, and our ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. The Company also considers specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee's credit rating. The Company records other-than-temporary impairments on marketable equity securities and marketable equity method investments in gain (loss) on equity investments. · Non-marketable equity investments based on the Company's assessment of the severity and duration of the impairment, and qualitative and quantitative analysis of the operating performance of the investee; adverse changes in market conditions and the regulatory or economic environment; changes in operating structure or management of the investee; additional funding requirements; and the investee's ability to remain in business. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. A loss in value of an investment that is other than a temporary decline shall be recognized. Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount of the investment or inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. The Company records other-than-temporary impairments for non-marketable cost method investments and equity method investments in gain (loss) on equity investments. Revenue Recognition
During the fiscal year 2018, the Company has adopted FASB Accounting Standards
Codification ("ASC"), Topic 606 ("ASC 606"), Revenue from Contracts with
Customers, using the modified retrospective method to all contracts that were
not completed as of
Pursuant to ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines is within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration the Company is entitled to in exchange for the goods or services the Company transfers to the customers. At inception of the contract, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
16 Table of Contents
Merchandise sales: The Company recognizes sales revenues from merchandise sales when customers obtain control of the Company's products, which typically occurs upon delivery to customer. Merchandise sales revenues are recorded at the sales price, or "transaction price".
Software sales: The Company does not develop the software products on its own. When the Company receives a purchase order from the customer, the Company would engage with the third-party software company to customize and develop the software products. The Company recognizes software revenues upon completion of the installation and testing, and transfer the control of the software products to the customer. Software revenues are recorded at the fixed sales price, or "transaction price", pursuant to the sales contracts. The Company may also charge the customer maintenance service fees on a straight-line basis over the service period pursuant to the sales contract. The Company concluded that the performance obligation for the maintenance service is distinct. Therefore, such maintenance service revenue can be separated from other elements in the arrangement.
Trade discount and allowances: The Company generally does not provide invoice discounts on product sales to its customers for prompt payment.
Product returns: The Company generally does not provide customers with the right to return a product for a full or partial refund, a credit, or an exchange for another product.
To date, product allowance and returns have been minimal and, based on its experience, the Company believes that returns of its products will continue to be minimal.
The following tables provide details of revenue by major products and by geography.
Revenue by Major Products For the year endedDecember 31, 2019 : Nutrition supplement$ 927,149 Water purifier machine 769,592 Automobile carbon reduction machine 354,401 Skin care product 135,964 Software 102,437 Total$ 2,289,543 Revenue by Geography For the year endedDecember 31, 2019 : Asia Pacific$ 2,289,543 Total$ 2,289,543
Leases -- The Company adopted FASB Accounting Standards Codification, Topic 842,
Leases ("ASC 842") using the modified retrospective approach, electing the
practical expedient that allows the Company not to restate its comparative
periods prior to the adoption of the standard on
17 Table of Contents
The Company applied the following practical expedients in the transition to the new standard and allowed under ASC 842:
Practical Description
Expedient
Reassessment of The Company elected not to reassess, at the application date, expired or whether any expired or existing contracts contained leases, existing the lease classification for any expired or existing leases, contracts and the accounting for initial direct costs for any existing leases. The Company elected to use hindsight in determining the lease
Use of hindsight term (that is, when considering options to extend or terminate
the lease and to purchase the underlying asset) and in assessing impairment of right-to-use assets. Reassessment of The Company elected not to evaluate existing or expired land existing or easements that were not previously accounted for as leases expired land under ASC 840, as allowed under the transition practical easements expedient. Going forward, new or modified land easements will be evaluated under ASU No. 2016-02. Separation of lease and Lease agreements that contain both lease and non-lease non-lease components are generally accounted for separately. components Short-term lease The Company also elected the short-term lease recognition recognition exemption and will not recognize ROU assets or lease exemption liabilities for leases with a term less than 12 months.
The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use ("ROU") assets and lease liabilities. ROU assets represent the Company's right to use underlying assets for the lease terms and lease liabilities represent the Company's obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. The Company's future minimum based payments used to determine the Company's lease liabilities mainly include minimum based rent payments. As most of Company's leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
The adoption of ASC 842 had no substantial impact on the Company's consolidated
balance sheets. The most significant impact was the recognition of the operating
lease right-of-use assets and the liability for operating leases. Accordingly,
adoption of this standard resulted in the recognition of operating lease
right-of-use assets of
In addition, the adoption of the standard did not have a material impact on the Company's results of operations or cash flows. Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in Selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.
Advertising Costs
Advertising costs are expensed at the time such advertising commences.
Advertising expenses were
18 Table of Contents
Post-retirement and Post-employment Benefits
The Company's subsidiaries in
Fair Value Measurements
FASB ASC 820, "Fair Value Measurements" defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:
• Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available. • Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 - Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability.
The carrying values of certain assets and liabilities of the Company, such as cash and cash equivalents, accounts receivable, inventory, advance to suppliers, prepaid expenses, accounts payable, accrued expenses, and due to shareholders, approximate fair value because of to their relatively short maturities.
19 Table of Contents Net Income Per Share
Basic income per share is computed by dividing net income by weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents, and potentially dilutive securities outstanding during each period. For the years ended December, 2019 and 2018, the Company does not have any outstanding common stock equivalents; therefore, a separate computation of diluted income per share is not presented.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when, in the opinion of management, it is more likely than not that some or all of any deferred tax assets will not be realized.
Concentration of Credit Risk
Cash and cash equivalents: The Company's financial instruments that are exposed
to concentrations of credit risk consist primarily of cash and cash equivalents.
The Company places its cash and temporary cash investments in high quality
credit institutions in
Customers: The Company performs ongoing credit evaluations of its customers' financial condition and generally requires no collateral.
For the year ended
Accounts Net sales for the receivable balance year ended as of December, Customer December 31, 2019 2019 A$ 2,171,766 $ 2,151,192 . For the year endedDecember 31, 2018 , two customers accounted for more than 10% of the Company's total revenues, represented approximately 69% and 16% of its total revenues and 69% and 13% of accounts receivable in aggregate atDecember 31, 2018 , respectively. Net sales for the Accounts receivable year ended balance as of Customer December 31, 2018 December 31, 2018 A$ 1,235,203 * $ 1,263,833 B $ 279,405 $ 237,980
*Related party transactions (see Note 4).
20 Table of Contents
Suppliers: The Company purchases its inventories from various suppliers.
For the year ended
Net purchase for the Accounts payable year ended December balance as of Supplier 31, 2019 December 31, 2019 A $ 96,743 $ - B $ 74,819 $ - C $ 52,505 $ - D $ 28,400 $ - For the year endedDecember 31, 2018 , three suppliers accounted for more than 10% of the Company's total net purchase, representing approximately 41%, 23% and 16% of total net purchase, and 0% of accounts payable in aggregate atDecember 31, 2018 , respectively: Net purchase for the Accounts payable year ended December balance as of 31, December 31, Supplier 2018 2018 E $ 50,529 $ - B $ 28,371 $ - F $ 19,620 $ -
Foreign-currency Transactions
Foreign-currency transactions are recorded in New Taiwan dollars ("NTD") and Renminbi ("RMB") at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars and Renminbi, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders' equity.
Translation Adjustment
The accounts of the Company's subsidiaries were maintained, and their financial
statements were expressed in New
Comprehensive Income (loss)
Comprehensive income (loss) includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income (loss) on its consolidated statements of operations and other comprehensive income (loss).
21 Table of Contents
Recent Accounting Pronouncements
In
In
Results of Operations
The following presents the consolidated results of the Company for the years
ended
Net sales
Net sales were
Cost of sales
Cost of sales was
Gross profit
Gross profit was
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of office rent,
salary and related costs for personnel and facilities, and professional service
fees. Selling, general and administrative expenses were
22 Table of Contents Income from operations
Income from operations was
Other income (expense)
Other income (expense) was
Net Income
As a result of the above factors, our net income was
Liquidity and Capital Resources
Cash and cash equivalents were
We had working capital of
Net cash provided by operating activities was
Net cash used in investing activities was
We did not have net cash flow provided by nor used in financing activities
during the year ended
As a result of the above factors, net increase in cash and cash equivalents was
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of
© Edgar Online, source