The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(1) The prior year comparative information has been retrospectively stated due to the common control acquisition on September 30, 2019.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(1) The prior year comparative information has been retrospectively stated due to the common control acquisition on September 30, 2019.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(1) The prior year comparative information has been retrospectively stated due to the common control acquisition on September 30, 2019.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2020 AND 2019
(Currency expressed in United States Dollars (US$), except for number of shares)
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Ando Holdings Ltd. (Ando Holdings Ltd. or the Company) was incorporated in the State of Nevada on August 22, 2015 and its fiscal year end is September 30. The primary business of the company was previously to offer mobile billboard display advertising. After thorough analysis, the Company terminated its advertising business. The Company is currently pursuing business opportunities in Hong Kong. The Company acquired 4 companies during this financial year, which were Ando Automobile Technology Limited, Ando Capital Investment Limited, Xian Ando Industrial Company Limited and Xian Ando Factoring Commercial Company Limited.
On November 29, 2018, the Company acquired Ando Automobile Technology Limited, a limited liability company incorporated in Hong Kong (AATL), from Lam Chi Kwong Leo with a cash consideration of $1,282. The Company intends this fully owned subsidiary to operate as an automobile trading company, trading in foreign-made automobiles to be shipped to Chinese buyers directly. As of March 31, 2020, this subsidiary had no operation.
On September 30, 2019, the Company and Ando Capital Investment Limited, a limited liability company incorporated in Hong Kong (ACIL) and Mr. Lam Chi Kwong Leo, a permanent Hong Kong resident, a major shareholder of the Company, our director and Chief Executive Officer and the sole shareholder of ACIL, entered into a set of agreements, collectively named as the Variable Interest Entity or VIE Agreements, pursuant to which the Company has contractual rights to control and operate the business of ACIL (the VIE). ACIL currently has insurance business and has been our VIE for our future business expansion and development in Hong Kong. ACIL has two wholly owned subsidiaries, namely Xian Ando Holdings Company Limited and Xian Ando Commercial Factoring Company Limited, and these two wholly owned subsidiaries have minimal operations.
Mr. Lam Chi Kwong Leo is the common director and major shareholder of the Company and ACIL. As a result of this common ownership and in accordance with the FASB Accounting Standards Codification Section 805 Business Combination, the transaction is being treated as a combination between entities under common control. The recognized assets and liabilities were transferred at their carrying amounts at the date of the transaction. The equity accounts of the combining entities are combined. Further, the companies will be combined retrospectively for prior year comparative information as if the transaction had occurred on October 1, 2017.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the period from inception on August 22, 2015 through March 31, 2020, the Company has had minimal operations, and has accumulated a deficit of $287,012. In view of this, the Companys ability to continue as a going concern is dependent upon the Companys ability to continue operations and to achieve a level of profitability large enough to cover the Companys expenses. The Company intends on financing its future development activities and its working capital needs largely from the sale of public equity securities, with some additional funding from other traditional financing sources, until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. Management has evaluated these factors and has determined that they raise substantial doubt about the Companys ability to continue as a going concern within one year after the date that the financial statements are issued.
The officers and directors have agreed to advance funds to the Company to meet its obligations.
8
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted accounting principles requires us to establish accounting policies and make estimates and assumptions that affect our reported amounts of assets and liabilities at the date of the financial statements. These financial statements include some estimates and assumptions that are based on informed judgments and estimates of management. We evaluate our policies and estimates on an on-going basis and discuss the development, selection, and disclosure of critical accounting policies with the Board of Directors. Predicting future events is inherently an imprecise activity and as such requires the use of judgment. Our financial statements may differ based upon different estimates and assumptions
Basis of Presentation
The accompanying financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP).
The accompanying financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany transactions and balances were eliminated in consolidation.
Below is the organization chart of the Group.
Use of Estimates and Assumptions
Preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
9
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Our deposit is currently deposit in DBS Bank (Hong Kong) Limited and Shanghai Commercial Bank Limited, and there is a Deposit Protection Scheme protects our eligible deposits held with bank in Hong Kong which is members of the Scheme. The scheme will pay us a compensation up to a limit of HKD500,000, which is equivalent to $64,102, if DBS Bank (Hong Kong) Limited or Shanghai Commercial Bank Limited fails.
Income taxes
The Company accounts for income taxes using the asset and liability method. The asset and liability method requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Companys assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided on deferred taxes if it is determined that it is more likely than not that the asset will not be realized. The Company recognizes penalties and interest accrued related to income tax liabilities in the provision for income taxes in its Consolidated Statements of Income.
Significant management judgment is required to determine the amount of benefit to be recognized in relation to an uncertain tax position. The Company uses a two-step process to evaluate tax positions. The first step requires an entity to determine whether it is more likely than not (greater than 50% chance) that the tax position will be sustained. The second step requires an entity to recognize in the financial statements the benefit of a tax position that meets the more-likely-than-not recognition criterion. The amounts ultimately paid upon resolution of issues raised by taxing authorities may differ materially from the amounts accrued and may materially impact the financial statements of the Company in future periods.
Cash Flow Reporting
The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (Indirect method) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.
The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
Net Loss Per Share
Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.
Related Parties
Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Transactions with related parties are disclosed in the financial statements.
10
Lease
Prior to September 30, 2019, the Company had not entered into formal lease agreement and the Company accounted for leases under ASC 840, Accounting for Leases. Effective October 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The implementation of ASC 842 did not have a material impact on the Companys consolidated financial statements and did not have a significant impact on our liquidity or on our compliance with our financial covenants associated with our loans. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of operating lease right-of-use assets of $77,209, lease liabilities for operating leases of $77,209, and a zero cumulative-effect adjustment to accumulated deficit. See Note 9 for further information regarding the impact of the adoption of ASC 842 on the Companys financial statements.
Foreign currencies translation
Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.
The reporting currency of the Company is the United States Dollars (US$) and the accompanying financial statements have been expressed in US$. Hong Kong Dollars (HK$), which is the respective functional currencies for the Company as the deposit is currently kept in HSBC Hong Kong. In addition, the Companys subsidiaries maintain their books and records in their respective local currency, which consists of the Hong Kong Dollars (HK$) and Chinese Yuan (CNY), which is also the respective functional currency of the subsidiaries.
Translation of amounts from the local currencies of the Company into US$ has been made at the following exchange rates for the respective periods:
|
As of and for the six months ended
March 31,
|
|
2020
|
|
2019
|
|
(unaudited)
|
|
(unaudited)
|
Period-end CNY : US$1 exchange rate
|
7.08
|
|
6.71
|
Period-average CNY : US$1 exchange rate
|
7.01
|
|
6.87
|
Period-end / average HK$ : US$1 exchange rate
|
7.80
|
|
7.80
|
Recent Accounting Pronouncements
Other than as noted above the Company has not implemented any pronouncements that had material impact on the financial statements, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 4 - CAPITAL STOCK
On December 26, 2019, the Company filed with the State of Nevada, a Certificate of Designation for its Series A preferred stock (the Certificate). The Certificate was effective on December 26, 2019. The Certificate establishes all of the rights of the holders of the Series A Preferred Stock (the Series A), as related to the Series A, including, but not limited to the lack of Series A conversion rights and voting rights, the six percent (6%) interest rights, and the liquidation preference (collectively, the Rights). On the same day, the Company also filed with State of Nevada, a Certificate of Change for increasing its authorized shares by 10,000,000 so that they consisted of 75,000,000 common stocks and 10,000,000 preferred stocks.
The Company is authorized to issue an aggregate of 10,000,000 and 75,000,000 preferred stock and common shares respectively, with a par value of $0.001 per share. As of March 31, 2020 and September 30, 2019, no preferred stocks and 12,000,000 common shares were issued and outstanding respectively.
11
As of March 31, 2020 and September 30, 2019, there are no warrants or options outstanding to acquire any additional shares of common stock of the Company.
NOTE 5 - RELATED PARTY TRANSACTIONS
On February 6, 2020, the Company renewed Note Purchase Agreement with an accredited related investor Lin Su Hui, our 5% shareholder. Pursuant to this agreement, the Company issued a promissory note to Lin Su Hui for $50,000, at 10% interest per annum, with a maturity date of February 6, 2021. Per the agreement, the note began to accrue interest immediately after the effective date February 1, 2020. The interest on the note is to be paid monthly. For the six months ended March 31, 2020, the Company has paid interest of $2,500 to Lin Su Hui in form of cash and has accrued interest of $417.
For the six months ended March 31, 2020, the Company entered into several loan agreements with Ando Credit Limited, a related party which the CEO of the Company, Mr. Lam, has significant influence on, amounted $2,373,000 in total (the Loan Amount), with interest rate 12% per annum. The Company would receive monthly interest income from Ando Credit Limited. The Loan Amount will not be due unless there is any event of default occurrence. The Company will be in default if the Note holders ask for repayment and Ando Credit Limited does not pay back to the Company. For the six months ended March 31, 2020, the Company generated $56,532 interest income from Ando Credit Limited. As of March 31, 2020, the Company has an interest income receivable in the amount of $21,179 from Ando Credit Limited.
As of March 31, 2020, a related party, that our CEO and director, Mr. Lam Chi Kwong Leo is the authorized representative, provided a loan amounted $4,324 to the Company. These loans are unsecured, payable on demand, and carry no interest.
For the six months ended March 31, 2020, our former CFO, Ms. Lee Hiu Lan paid expense on behalf of the Company in the amount of $1,400 and as of March 31, 2020, the Company owed $465 in total to Ms. Lee. This loan is unsecured, payable on demand, and carries no interest.
The current office space in Hong Kong is provided by a related party at no charge.
NOTE 6 - THIRD PARTY - NOTE PAYABLE
Balances of note payable as of March 31, 2020 and September 30, 2019 consisted of the following:
|
As of
December 31,
2019
(Unaudited)
|
|
As of
September 30,
2019
(Audited)
|
Tsai Ming Hsiu due on November 28, 2020 with 10% per annum
|
$
|
50,000
|
|
$
|
-
|
Chang Jui Yu due on December 6, 2020 with 10% per annum
|
|
350,000
|
|
|
-
|
Liao Shu Hua due on December 9, 2020 with 10% per annum
|
|
50,000
|
|
|
-
|
Chen Hsuan Yi due on December 9, 2020 with 10% per annum
|
|
60,000
|
|
|
-
|
Jean Mei Ing due on December 10, 2020 with 10% per annum
|
|
50,000
|
|
|
-
|
Lin Po Chung due on December 10, 2020 with 10% per annum
|
|
240,000
|
|
|
-
|
Lee Hsiu Kung due on December 13, 2020 with 10% per annum
|
|
70,000
|
|
|
-
|
Wu Tai Lin due on December 16, 2020 with 10% per annum
|
|
50,000
|
|
|
-
|
Huang Yu due on December 16, 2020 with 10% per annum
|
|
100,000
|
|
|
-
|
Lin Cheng Yu due on December 17, 2020 with 10% per annum
|
|
100,000
|
|
|
-
|
Wu Chih Kao due on January 1, 2021 with 10% per annum
|
|
50,000
|
|
|
-
|
Lee Hsiu Kung due on January 3, 2021 with 10% per annum
|
|
30,000
|
|
|
-
|
Jao Tzu Yun due on January 7, 2021 with 10% per annum
|
|
60,000
|
|
|
-
|
12
|
As of
December 31,
2019
(Unaudited)
|
|
As of
September 30,
2019
(Audited)
|
Li Cai Zhen due on January 10, 2021 with 10% per annum
|
|
100,000
|
|
|
-
|
Wu Tai Lin due on January 17, 2021 with 10% per annum
|
|
20,000
|
|
|
-
|
Su Liang An due on January 29, 2021 with 10% per annum
|
|
50,000
|
|
|
-
|
Liang Pei Jen due on February 13, 2021 with 10% per annum
|
|
100,000
|
|
|
-
|
Lin Pin Hui due on February 25, 2021 with 10% per annum
|
|
100,000
|
|
|
-
|
Teng Ying Min due on February 28, 2021 with 10% per annum
|
|
155,000
|
|
|
-
|
Kao Ko Chen due on March 3, 2021 with 10% per annum
|
|
50,000
|
|
|
-
|
Chiang Chao Chun due on March 9, 2021 with 10% per annum
|
|
200,000
|
|
|
-
|
Hsu Chin Chong due on March 12, 2021 with 10% per annum
|
|
100,000
|
|
|
-
|
Huang Yu due on March 13, 2021 with 10% per annum
|
|
100,000
|
|
|
-
|
Lin Po Chung due on March 18, 2021 with 10% per annum
|
|
20,000
|
|
|
-
|
Lien Chia Yun due on March 24, 2021 with 10% per annum
|
|
200,000
|
|
|
-
|
Lee Pei Hsuan due on April 1, 2021 with 10% per annum
|
|
50,000
|
|
|
-
|
Total Note Payable
|
$
|
2,505,000
|
|
$
|
-
|
Less: Current Portion
|
$
|
(2,455,000)
|
|
$
|
-
|
Long-Term Portion
|
$
|
50,000
|
|
$
|
-
|
Future maturities of long-term debt as of March 31, 2020 are as follows which does not include related party debt separately stated:
Years ending March 31,
|
|
2021
|
$
|
2,455,000
|
2022
|
|
50,000
|
Total
|
$
|
2,505,000
|
All the above notes carry a 10% per annum with monthly interest accrued to the aforementioned lenders. The principal is received by the Company seven days prior to the effective date of such promissory note, and as of March 31, 2020, the Company received an aggregate amount of $50,000 before the corresponding effective dates of the promissory notes.
NOTE 7 - RELATED PARTY - NOTE PAYABLE
On February 6, 2020, the Company entered into a Note Purchase Agreement with an accredited related investor Lin Su Hui, our 5% shareholder. Pursuant to this agreement, the Company issued a promissory note to Lin Su Hui for $50,000, at 10% interest per annum, with a maturity date of February 6, 2021. Per the agreement, the note began to accrue interest immediately after the effective date February 6, 2020.
NOTE 8 - PREPAID EXPENSES
OTCQB annual fees and rental deposit are included as prepaid expenses as of March 31, 2020. These expenses are stated at cost and are charged to expense over the periods the Company expects to benefit from them. As of March 31, 2020, the Company has prepaid expenses of $5,646, which is consisted of $3,000 OTCQB annual fees and $2,180 rental deposit.
NOTE 9 - LEASE
The Company has operating lease agreements for an office in Xian, China with remaining lease terms of 3 years. The Company does not have any other leases. The Company accounts for the lease and non-lease components of its leases as a single lease component. Lease expense is recognized on a straight-line basis over the lease term.
13
Operating lease right-of-use (ROU) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Companys incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.
This standard did not have a significant impact on our liquidity.
The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
|
Six Months ended
March 31, 2020
|
|
(Unaudited)
|
Lease Cost
|
|
Operating lease cost (included in general and administrative expenses in the Companys unaudited condensed statement of operations)
|
$
|
11,311
|
|
|
|
Other Information
|
|
|
Cash paid for amounts included in the measurement of lease liabilities for the six months ended March 31, 2020
|
$
|
13,221
|
Remaining lease term - operating lease (in years)
|
|
2.583
|
Discount rate - operating lease
|
|
4.75%
|
|
As of
March 31, 2020
|
|
(Unaudited)
|
Operating lease
|
|
Right-of-use assets, net
|
$
|
65,994
|
|
|
|
Operating lease liabilities - current portion
|
|
23,900
|
Operating lease liabilities - non-current portion
|
|
40,204
|
Total operating lease liabilities
|
$
|
64,104
|
Year Ending
|
Operating
Lease
|
2020 (remaining 6 months)
|
$
|
13,085
|
2021
|
|
26,170
|
2022
|
|
28,263
|
Total lease payments
|
$
|
67,518
|
Less: Present value discount
|
|
(3,414)
|
Present value of lease liabilities
|
$
|
64,104
|
Lease expenses were $11,331 during the six months ended March 31, 2020 respectively, and there was no rent incurred during the six months ended March 31, 2019, respectively.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
On November 28, 2019, the Company entered into a securities purchase with an accredited investor, Tsai Ming Hsiu (the Lender), pursuant to which the Company issued promissory note for an aggregate of $50,000, with an interest rate of 10% per annum. The Note is to be paid within one year beginning from November 28, 2019. The Note mature on November 28, 2020 (Maturity Date) and contain an auto renewal clause for one year if the Lender fails to provide notice for redemption on or before 30 days from the Maturity Date. A Form 8-K was filed on December 2, 2019.
14
In December 2019, the Company entered into several securities purchase agreements with a batch of accredited investors, pursuant to which the Company issued promissory notes for an aggregate of $1,070,000 (the Outstanding Balance), with an interest rate of 10% per annum (the Note). The Outstanding Balance of the Notes are to be paid within one year beginning from the effective dates of the notes (Maturity Dates). The Notes contain an auto renewal clause for one year if the Lender fails to provide notice for redemption on or before 30 days from the Maturity Date. A Form 8-K was filed on December 11, 2019.
In January 2020, the Company entered into several securities purchase agreements with a batch of accredited investors, pursuant to which the Company issued promissory notes for an aggregate of $310,000 (the Outstanding Balance), with an interest rate of 10% per annum (the Note). The Outstanding Balance of the Notes are to be paid within one year beginning from the effective dates of the notes (Maturity Dates). The Notes contain an auto renewal clause for one year if the Lender fails to provide notice for redemption on or before 30 days from the Maturity Date.
On February 6, 2020, the Company entered into a Note Purchase Agreement with an accredited related investor Lin Su Hui, our 5% shareholder. Pursuant to this agreement, the Company entered a promissory note to Lin Su Hui for $50,000, at 10% interest per annum, with a maturity date of February 6, 2021. Per the agreement, the note began to accrue interest immediately after the effective date February 6, 2020. The interest on the note is to be paid monthly.
In February 2020, the Company entered into several securities purchase agreements with a batch of accredited investors, pursuant to which the Company issued promissory notes for an aggregate of $355,000 (the Outstanding Balance), with an interest rate of 10% per annum (the Note). The Outstanding Balance of the Notes are to be paid within one year beginning from the effective dates of the notes (Maturity Dates). The Notes contain an auto renewal clause for one year if the Lender fails to provide notice for redemption on or before 30 days from the Maturity Date.
In March 2020, the Company entered into several securities purchase agreements with a batch of accredited investors, pursuant to which the Company issued promissory notes for an aggregate of $670,000 (the Outstanding Balance), with an interest rate of 10% per annum (the Note). The Outstanding Balance of the Notes are to be paid within one year beginning from the effective dates of the notes (Maturity Dates). The Notes contain an auto renewal clause for one year if the Lender fails to provide notice for redemption on or before 30 days from the Maturity Date.
We foresee an aggregate monthly interest expense at approximately $22,000 since April 1, 2020.
NOTE 11 - SUBSEQUENT EVENT
On April 1, 2020, the Company entered into a securities purchase with an accredited investor, Lee Pei Hsuan (the Lender), pursuant to which the Company issued promissory note for an aggregate of $50,000, with an interest rate of 10% per annum. The Note is to be paid within one year beginning from April 1, 2020. The Note matures on April 1, 2021 (Maturity Date) and contain an auto renewal clause for one year if the Lender fails to provide notice for redemption on or before 30 days from the Maturity Date.
On April 14, 2020, Ms. Lee Hiu Lan resigned from the position of Chief Financial Officer, Secretary and Treasurer, and our Chief Executive Officer, Mr. Lam Chi Kwong Leo took over all these position on the same date.
The emergence and wide spread of the novel Coronavirus (COVID-19) since the beginning of 2020 has affected business and economic activities across the world. During periods of unfavorable market and economic conditions, the Groups results of operations may be adversely affected by a total stop on insurance policy selling due to the implementation of social distancing. During a market or general economic downturn, the Group may also consider to make higher provision on the loan lent to Ando Credit Limited. In addition, due to uncertainty or volatility in the market or in response to difficult market conditions, clients or prospective clients may withdraw their decision from insurance policy application.
15