CREDIT ONE FINANCIAL INC - FORM 10-Q

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EX-31 - EXHIBIT 31 - CREDIT ONE FINANCIAL INC	exhibit31.htm
EXCEL - IDEA: XBRL DOCUMENT - CREDIT ONE FINANCIAL INC	Financial_Report.xls
EX-32 - EXHIBIT 32 - CREDIT ONE FINANCIAL INC	exhibit32.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-50320

CREDIT ONE FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Florida 59-3641205

(State or other jurisdiction of incorporation or organization (I.R.S. Employer Identification No.)

80 WALL STREET, SUITE 818, NEW YORK, NEW YORK 10005

(Address of principal executive offices) (Zip Code)

(212) 809-1200

(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non- accelerated filer or a smaller reporting company. See definition of "large accelerated filer, and accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ X ] Accelerated filer [ ] Non Accelerated filer [ ] Smaller Reporting Company [ ]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Applicable Only to Corporate Issuers

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 326,155,623 shares of common stock, par value $0.001, as of May 11, 2015.

TABLE OF CONTENTS


		PAGE

	PART I - FINANCIAL INFORMATION

Item 1	Financial Statements	3

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3	Quantitative and Qualitative Disclosures About Market Risk	16

Item 4T	Controls and Procedures	16

	PART II – OTHER INFORMATION

Item 1	Legal Proceedings	17

Item 1A	Risk Factors	17

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	17

Item 3	Defaults Upon Senior Securities	17

Item 4	Mine Safety Disclosures	17

Item 5	Other Information	17

Item 6	Exhibits	17

	SIGNATURES	17

Item 1. Financial Statements

CREDIT ONE FINANCIAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


			March 31,		December 31,
			2015			2014
ASSETS			(Unaudited)			(Audited)
Current Assets:
	Cash and cash equivalents		$	600,738		$	641,514
	Prepaid expenses and other current assets			710,229			716,394
		Total Current Assets		1,310,967			1,357,908

Property, Plant and Equipment
	Furniture and fixture, net of accumulated depreciation of $6,521 and $6,511, respectively			36			45
		Total Property, Plant and Equipment		36			45

Trademark, net				97,531			95,156
Note receivable				8,178,792			8,073,263
Intangible assets, net of accumulated amortization of $2,069,996 and $1,996,617, respectively				1,572,027			1,643,904

Total Assets			$	11,159,353		$	11,170,276

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
	Accounts payable and accrued expenses		$	112,256		$	63,218
	Deferred revenue			174,092			232,028
		Total Current Liabilities		286,348			295,246

Stockholders' Equity:
	Common stock, $0.001 par value, 500,000,000 shares authorized, 326,155,623 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively			326,156			326,156
	Additional paid-in capital			12,589,304			12,589,304
	Accumulated deficit			(2,042,925)			(2,036,423)
	Currency translation adjustment			470			(4,007)
		Total Stockholders' Equity		10,873,005			10,875,030

Total Liabilities and Stockholders' Equity			$	11,159,353		$	11,170,276

See accompanying notes to the consolidated financial statements

CREDIT ONE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)


				Three-Months Ended March 31,
				2015				2014
Revenue
Advertising Revenue				$	58,023			$		48,333
		Total revenue		58,023				48,333
Operating Expenses
	Selling, general and administrative			166,707				249,010
		Total operating expenses		166,707				249,010

Loss From Operations				(108,684)				(200,677)

Other Income (Expenses)
	Interest income			102,182				167,426
			Total other income (expense)	102,182				167,426

Net Income (Loss) Before Income Taxes				(6,502)				(33,251)

Income Tax Provision				-				-

Net Income (Loss)				$ (6,502)				$ (33,251)

Other Comprehensive Income (Loss)
Foreign currency translation adjustment							4,476	(3,702)

Total Comprehensive Income (Loss)				$ (2,026)				$ (36,963)
Income (Loss) Per Share:
	Basic and Diluted			$		0.00		$	0.00

Weighted Average Number of Shares:				326,155,623				326,155,623

See accompanying notes to the consolidated financial statements

CREDIT ONE FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


				Three Months Ended March 31,
				2015		2014
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Income (loss)			$	(6,502)	$	(33,251)
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Accretion of interest on note receivable			(102,183)		(167,418)
		Amortization of intangible asset			72,545		136,830
		Depreciation			9		426
	Changes in operating assets and liabilities:
		Prepaid expenses and other current assets			6,166		27,198
		Account payable and accrued expenses			49,038		42,769
		Deferred revenue			(57,936)		144,998
			Cash provided by (used in ) operating activities		(38,863)		151,552

CASH FLOWS FROM INVESTING ACTIVITIES:
	Investment in notes receivable				-		(1,005,323)
	Investment in trademark				(2,375)		(2,155)
		Cash provided by (used in) investing activities			(2,375)		(1,007,478)


Impact of Exchange Rate on Cash and Cash Equivalents					462		(1,093)

Net Increase (Decrease) in Cash and Cash Equivalents					(40,776)		(857,019)

Cash and Cash Equivalents, Beginning					641,514		2,086,943

Cash and Cash Equivalents, Ending				$	600,738	$	1,229,924

SUPPLEMENTAL CASH FLOW INFORMATION:

		Cash Paid for Interest		$	-	$	-
		Cash Paid for Income Taxes		$	-	$	-

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
				$		$	-

See accompanying notes to the consolidated financial statements

CREDIT ONE FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2015

Note 1 –Nature of Business

Credit One Financial, Inc. (the “Company”) was incorporated in the State of Florida on September 24, 1999. The Company was engaged in market research regarding the cost and availability of non-performing credit card debt portfolios. It was also engaged in research regarding the current market price for re-performing portfolios as well as the market prices offered for portfolios deemed non-collectable at the time of sale.

In February 2008, the Company entered into a Joint Venture Agreement with Global Select Limited in Hong Kong. Under the agreement, a joint venture company, Moderation Limited, was set up in Hong Kong, whereby, on January 12, 2009, the Company contributed $16 million Hong Kong dollars, approximately $2.06 million, in exchange for 51.6% of the equity interest in Moderation, and Global Select and its partner together contributed $15 million Hong Kong dollars, approximately $1.94 million, for 48.4% of the equity interest in Moderation. The purpose of the joint venture is to engage in a business of natural resources products, primarily graphite at this time, in China.

In January 2009, Moderation Limited established a wholly owned subsidiary “Liaoning Sinorth Resources Co., Ltd.” in Yingkou, Liaoning Province, China. The main business of Liaoning Sinorth Resources Co., Ltd. is processing and distribution of mineral products, primarily graphite, in China.

In August 2010, the Company established a wholly owned subsidiary “E&M International Limited (“E&M”)” in the Cayman Islands. The purpose of E&M is to conduct its operations in the business of entertainment and media. On September 16, 2010, E&M changed its name to CEM International Ltd. (“CEM”).

On November 18, 2010, the Company entered into a share purchase agreement with China Minerals International Limited (“China Minerals”). Pursuant to the share purchase agreement, the Company agreed to sell and China Minerals agreed to acquire the Company’s 51.6% equity interest in Moderation Limited (“Moderation”), a subsidiary of the Company located in Hong Kong, for $16 million Hong Kong dollars, approximately $2.06 million in cash. The transaction was closed on November 30, 2010.

Note 2 - Summary of Significant Accounting Policies

Basis of presentation

The accompanying interim consolidated financial statements for the three months ended March 31, 2015 and 2014 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations realized during an interim period are not necessarily indicative of results to be expected for a full year. These consolidated financial statements should be read in conjunction with the information filed as part of the Company’s 2014 Annual Report on Form 10-K, which was filed on February 23, 2015.

Principles of Consolidation

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Revenues and expenses are reported on the accrual basis, which means that income is recognized as it is earned and expenses are recognized as they are incurred.

Management is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that (1) recoded transactions are valid; (2) valid transactions are recorded; and (3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

The consolidated financial statements present the financial position and the results of operations of Credit One Financial, Inc. and its 100% owned subsidiary, CEM International Ltd.

All significant intercompany transactions and balances have been eliminated in consolidation.

Provision for Income Taxes

Deferred income taxes result from temporary differences between the basis of assets and liabilities recognized for differences between the financial statement and tax basis thereon, and for the expected future tax benefits to be derived from net operating losses and tax credit carry forwards. The Company has approximately $639,336 in U.S. net operating loss carry-forwards and $1,403,589 in Macau net operating loss carry-forwards as of March 31, 2015, and a valuation allowance equal to the tax benefit of the accumulated net operating losses has been established since it is uncertain that future taxable income from operations in the United States of America will be realized during the applicable carry-forward periods. The net operating loss carry-forwards may be limited under the change of control provisions of the Internal Revenue Code, Section 382.

The Company applies the provisions of income tax accounting standards for uncertainty in income taxes, which prescribe a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. When applicable, the Company will include interest and penalties related to uncertain tax positions in income tax expense.

Use of Estimates in the Preparation of the Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and those differences could be material.

Fair Value Measurements

The Company follows accounting guidance relating to fair value measurements. This guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2 – inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

Level 3 – unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the unobservable inputs.

The fair value of the Company’s financial instruments, which consist principally of cash and cash equivalents, are based on level 1 input, and equal carrying amounts.

Cash and Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

As of March 31, 2015, the Company maintained $586,465 in foreign bank accounts not subject to FDIC coverage. The remaining balance of $14,273 at March 31, 2015 was maintained in a domestic bank account and fully insured by FDIC.

Foreign Currency

The Company reports it financial position and results of operations in U.S. dollars. For its subsidiaries that have functional currencies that are foreign currencies, the elements of the financial statements are translated by using a

current exchange rate. Assets and liabilities were translated at exchange rates as of the balance sheet date. Revenues, expenses, gains and losses were translated at average exchange rates in effect for the periods presented. Transaction adjustments result from the process of translating the subsidiaries’ financial statements into US dollars and are not included in determining net income, but are reported in other comprehensive income. There was currency translation adjustment of $4,476 and $(3,702) for the three months ended March 31, 2015 and 2014, respectively.

Foreign currency transactions are transactions denominated in a currency other than the entity's functional currency. At the date the transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured and recorded in the functional currency of the recording entity by use of the exchange rate in effect at that date. At each balance sheet date, recorded balances that are denominated in a currency other than the functional currency of the recording entity are adjusted to reflect the current exchange rate, with any resulting differences reported in the current period statement of operations. For the three months ended March 31, 2015 and 2014, the Company recognized no foreign currency exchange losses in the consolidated statements of operations.

Revenue Recognition

The Company recognizes revenue in accordance with Securities and Exchange Commission revenue recognition accounting standards.

As an advertising agent, CEM is in the service business dedicated to creating, planning and handling advertising for its clients. Advertising revenue is recognized upon the delivery of the contracted advertising services and when no significant Company performance obligation remains. Service revenue is recognized as the contracted services are rendered.

Advertising Rights

Advertising rights represented costs for exclusive rights to advertise on Macau Lotus Satellite TV Media Limited’s (“Lotus”) network. The costs were determined as the difference between the face value of non-interest bearing notes receivable from Lotus and the present value of the notes receivable at the time of issuance. This intangible asset is being amortized over the remaining life of the rights, which expire August 31, 2020.

On November 25, 2014, CEM amended the 2010 Agreement with Lotus TV whereby Lotus TV agreed to accelerate its repayment of the loan balance in annual instalments of US$2,000,000 each starting from 2015 until the entire remaining loan balance shall have been paid in full, and CEM agreed to forego its exclusive advertising rights granted by Lotus TV, but remain as Lotus TV’s preferred advertising agent. As a result of the amendment, the intangible asset was reduced by $1,889,427.

Trademark

Legal costs associated with serving and protecting trademark are being capitalized and will be amortized over its estimated useful life.

Imputed Interest

In 2010, 2011, 2013 and 2014, the Company issued non-interest bearing notes receivable which fully mature in 2020. The notes receivable were recorded at issuance at its present value using an effective interest rate of 8%, which was the Company’s stated rate on another note receivable. At the balance sheet date, the notes are revalued with the change in present value recorded as interest income in the Consolidated Statements of Operations. On November 25, 2014, the repayment of the notes receivable was accelerated and the carrying value of the notes receivable was increased by $1,889,427 for the change in present value of the notes.

Impairment of Long Lived Assets

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison for the carrying amount of an asset to future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets which considers the discounted future net cash flows.

Property, Plant and Equipment

Acquisitions of property, plant and equipment are recorded at cost. Improvements and replacements of property, plant and equipment are capitalized. Maintenance and repairs that do not improve or extend the lives of furniture and equipment are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful life of each class of depreciable assets, which is 3-20 years.

Earnings Per Share

Earnings Per Share is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the year plus potential dilutive instruments such as stock options and warrants. The effect of stock options on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company's common stock at the average market price during the period. The Company has no stock options, warrants or other potentially dilutive instruments outstanding at March 31, 2015 and 2014, respectively.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. ASU 2014-09 is effective for public companies for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is not permitted. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the impact of adopting the new revenue standard on its financial statements.

The Company has evaluated all other newly issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company’s financial statements.

Note 3 - Note Receivable and Advertising Rights Asset

CEM International Limited entered into an exclusive agreement with Macau Lotus Satellite TV Media Limited (Lotus) on August 26, 2010 to provide advertising services for a ten year period commencing on September 1, 2010. In consideration for the exclusive advertising rights granted by Lotus, CEM will provide advertising services and issue, over the course of the agreement, US$10 million in loans to Lotus. The amount and duration of each loan shall be negotiated by the parties, depending on Lotus’s financial needs.

On December 17, 2010, CEM issued Lotus TV a HK$15,000,000 (US$1,928,839) loan which is backed by a non-interest bearing promissory note, due on August 31, 2020. The note receivable was discounted to its estimated fair value of HK$7,105,808 (US$913,872) using an effective interest rate of 8%. This difference between the face value and the present value of HK$7,894,192 (US$1,014,967) was allocated to an intangible asset captioned Exclusive Advertising Rights.

On January 31, 2011, CEM issued Lotus TV an additional HK$6,084,000 (US$780,000) loan which is backed by a non-interest bearing promissory note, due on August 31, 2020. The note receivable was discounted to its estimated fair value of HK$2,833,577 (US$363,279) using an effective interest rate of 8%. This difference between the face value and the present value of HK$3,250,423 (US$416,721) was allocated to an intangible asset captioned Exclusive Advertising Rights.

On June 12, 2011, CEM issued Lotus TV a series of additional loans totaling HK$43,700,000 (US$5,623,255), backed by a non-interest bearing promissory note, due on August 31, 2020. The note receivable was discounted to its estimated fair value of HK$20,831,819 (US$ 2,680,610) using an effective interest rate of 8%. This difference between the face value and the present value of HK$22,868,181 (US$2,942,645) was allocated to the intangible asset captioned Exclusive Advertising Rights.

On August 9, 2011, CEM issued Lotus TV an additional loan HK$4,800,000 (US$614,731), backed by a non-interest bearing promissory note, due on August 31, 2020. The note receivable was discounted to its estimated fair value of HK$2,334,232 (US$ 299,814) using an effective interest rate of 8%. This difference between the face value and the present value of HK$2,465,768 (US$314,917) was allocated to the intangible asset captioned Exclusive Advertising Rights.

On September 25, 2012, Lotus TV invoiced the Company $1,000,000 for handling fees related to an advertising agreement which had not commenced. The invoice terms included $200,000 cash and $800,000 reduction in the note receivable balance due from Lotus TV. The $1,000,000 fee was included in prepaid expense, and is being amortized to expense as advertising slots are used. As of December 31, 2012, the balance of prepaid expenses related to this advertising agreement is approximately $679,000.

On April 9, 2013, CEM issued Lotus TV an additional loan HK$4,658,425 (US$600,000), backed by a non-interest bearing promissory note, due on August 31, 2020. The note receivable was discounted to its estimated fair value of HK$2,578,771 (US$332,143) using an effective interest rate of 8%. This difference between the face value and the present value of HK$2,076,654 (US$267,857) was allocated to the intangible asset captioned Exclusive Advertising Rights.

On February 17, 2014, CEM issued Lotus TV an additional loan HK$7,800,000 (US$1,005,543) , backed by a non-interest bearing promissory note, due on August 31, 2020. The note receivable was discounted to its estimated fair value of $596,862 using an effective interest rate of 8%. This difference between the face value and the present value of $408,681 was allocated to the intangible asset captioned Exclusive Advertising Rights.

On June 13, 2014, CEM issued Lotus TV an additional loan HK$3,000,000 (US$387,027) , backed by a non-interest bearing promissory note, due on August 31, 2020. The note receivable was discounted to its estimated fair value of $235,916 using an effective interest rate of 8%. This difference between the face value and the present value of $151,111 was allocated to the intangible asset captioned Exclusive Advertising Rights.

An intangible asset captioned Exclusive Advertising Rights has been recorded in the accompanying consolidated balance sheets representing the difference between the face amount of the notes receivable and the respective present values at the time of issuance. This difference was deemed an asset because the interest-free note was a condition of the exclusive agreement.

A Summary of the notes receivable and intangible asset is as follows:

SCHEDULE OF NOTE RECEIVABLE


Date of Note	Amount Paid Lotus TV	Discounted Note Balance at Inception	Aggregate Note Balance As of 3/31/ 2015
12/17/2010	$ 1,928,839	$ 913,872
1/31/2011	780,000	363,279
6/12/2011	5,623,255	2,680,610
8/9/2011	614,731	299,814
4/9/2013	600,000	332,143
2/17/2014	1,005,543	596,862
6/13/2014	387,027	235,916
11/25/2014	-	1,889,427
	$ 10,939,395	$ 7,311,923	$ 8,178,792

SCHEDULE OF INTANGIBLE ASSET


Date of Note	Amount Paid Lotus TV	Amount Allocated to Intangible Asset	Aggregate Intangible Asset, Net As of 3/31/ 2015
12/17/2010	$ 1,928,839	$ 1,014,967
1/31/2011	780,000	416,721
6/12/2011	5,623,255	2,942,645
8/9/2011	614,731	314,917
4/9/2013	600,000	267,857
2/17/2014	1,005,543	408,681
6/13/2014	387,027	151,111
11/25/2014	-	(1,889,427)
	$ 10,939,395	$ 3,627,472	$ 1,572,027

As a result of the November 25, 2014 amendment to accelerate repayment of the note and to forego exclusive rights but remain as a preferred agent, the Company increased the carrying value of the note receivable by $1,889,427 and decreased the intangible asset by $1,889,427. The adjustment was based on the calculated present value of the notes in aggregate using annual repayment installments of $2 million beginning in 2015 until paid in full and an effective interest rate of 8%. The offset adjustment reflects the original accounting.

Interest income accrued on the notes amounted to $102,183 and $167,426 for the three months ended March 31, 2015 and 2014, respectively. Amortization of the intangible asset amounted to $72,545 and $136,860 for the three months ended March 31, 2015 and 2014, respectively, and was included in selling, general and administrative expenses in the accompanying consolidated financial statements.

Note 4 – Income Taxes

The Company accounts for income taxes using the liability method, which requires recognition of deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.

Effective January 1, 2008, the Chinese government enacted the Corporate Income Tax Law, and promulgated related regulations, which, among other things, imposes a unified income tax rate of 25% for both domestic and foreign invested enterprises. The tax rate for Macau is 12%.

Due to the Company’s accumulated net losses, there was no provision for income taxes. The Company’s effective tax rate for the period ended March 31, 2015 was 0% due to the net operating loss carry-forward. The Company’s taxes were subject to a full valuation allowance as follows at March 31, 2015 and December 31, 2014:


March 31, 2015
Tax		Accumulated Net			Deferred		Valuation
Jurisdiction		Operating Loss	Expiration		Tax Asset		Allowance

United States	$	639,336	2019 - 2034	$	240,582	$	(240,582)
Macau		1,403,589	2013 - 2017		168,431		(168,431)
	$	2,042,925		$	409,013	$	(409,013)


December 31, 2014
Tax		Accumulated Net			Deferred		Valuation
Jurisdiction		Operating Loss	Expiration		Tax Asset		Allowance

United States	$	614,936	2019 - 2034	$	231,400	$	(231,400)
Macau		1,421,486	2013 - 2017		170,578		(170,578)
	$	2,036,422		$	401,978	$	(401,978)

The net deferred tax asset generated by the loss carry-forward has been fully reserved.

The Company has no United States corporate income tax liability as of March 31, 2015 and December 31, 2014.

Note 5 – Capital Stock

On April 9, 2010, the Company filed a Certificate of Amendment with the Secretary of State of the State of Florida to increase the authorized number of shares of its common stock from 110,000,000 shares to 500,000,000 shares, with a par value of $0.001 per share. As of March 31, 2015, there were 326,155,623 shares of the Company’s common stock issued and outstanding.

On May 3, 2011, the Company issued an aggregate of 300 million shares of the Company’s common stock to 16 investors in a private placement at a price of $0.03 per share, for an aggregate consideration of $9,000,000 in cash.

On January 30, 2013, the Company entered into a Securities Purchase Agreement with certain investors in a private placement. Pursuant to the agreement, the Company agreed to issue and investors agreed to purchase an aggregate of 183 million shares of the Company’s common stock at a price of $0.03 per share, for an aggregate consideration of $5,490,000 in cash, of which $720,000 was received on April 9, 2013 for 24,000,000 shares.

Note 6 - Commitments and Contingencies

On August 26, 2010, E&M (name changed to CEM International Ltd on September 16, 2010) entered into an Advertising Agreement (the “Agreement”) with Macau Lotus Satellite TV Media Limited (“Lotus TV”), pursuant to which Lotus TV authorized E&M as its exclusive agent to operate all of its advertising businesses, and to be entitled to all the revenues generated therefrom (“Advertising Rights”). On November 25, 2014, CEM amended the 2010 Agreement and forego its exclusive advertising rights but remain as Lotus TV’s preferred advertising agent.

The term of this Agreement is 10 years from September 1, 2010 to August 31, 2020. In consideration for Lotus TV’s grant of the Advertising Rights, E&M agrees to pay Lotus TV a fixed annual fee every year (the “Annual Fee”) regardless of the total amount of advertising revenues received by E&M. Under the Agreement, E&M paid Lotus TV an initial Annual Fee of $1,000,000 Hong Kong dollars (approximately US$128,900) for the first year of the Agreement, which Annual Fee will increase at 10% every year for the following two years. The amount of Annual Fee payable at March 31, 2015 and December 31, 2014 was $110,137 and $62,910, respectively.

E&M also agrees to extend to Lotus TV, interest free, a credit facility consisting of a series of loans (each a “Loan”) totaling a minimum of US$10 million over a period of 10 years. The terms of each Loan and the increase of Annual Fee after the first three years of the Agreement will be renegotiated by the parties. The Company currently expects that the loans will be originated from its cash reserve, advertising revenue and, if necessary, raised from the capital market. On November 25, 2014, Lotus TV agreed to accelerate its repayment of its outstanding loan balance with CEM in annual installments of $2,000,000 cash starting in 2015 until the remaining balance is paid in full.

License fee expense for the three months ended March 31, 2015 and 2014 were $47,195 and $42,887, respectively, and is included in selling, general and administrative expenses.

Note 7 – Risks and Uncertainties

The Company’s business, financial condition and results of operations could be materially affected by many risks and uncertainties including the following:

As a U.S. based company doing business in Macau, the Company must comply with all Macau laws, rules and regulations, and pronouncements, and endeavor to obtain all necessary approvals from applicable Chinese regulatory authorities.

Fluctuations in the exchange rate between the Hong Kong currency and the U.S. dollar may impact the Company’s operating income.

Note 8 - Subsequent Events

The Company has evaluated subsequent events from the balance sheet date through the date the financial statements were issued. Per our evaluation there were no significant events that require disclosure.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion in this quarterly report on Form 10-Q contains forward-looking statements. Such statements are based upon our beliefs, as well as assumptions made by and information currently available to us as of the date of this report. These forward-looking statements can be identified by their use of such verbs as "expect", "anticipate", "believe" or similar verbs or conjugations of such verbs. If any of these assumptions prove incorrect or should unanticipated circumstances arise, the actual results could materially differ from those anticipated by such forward-looking statements.

Overview

Until November 30, 2010, the Company’s main business was processing and distribution of mineral products, primarily graphite products, in China. Despite the efforts it had made, the Company’s sales did not grow as much as the Company had expected. Because it was more and more difficult to carry out its graphite business, on November 18, 2010, the Company entered into a share purchase agreement with China Minerals International Ltd., by which the Company sold its 51.6% equity interest in Moderation Ltd. for $16 million Hong Kong dollars, approximately $2.06 million in cash, to China Mineral. The transaction was closed on November 30, 2010, and the Company ceased to be a processor and distributor of graphite products.

On August 26, 2010, CEM International Limited (“CEM”, formerly E&M International Ltd.), a wholly-owned subsidiary of the Company, entered into an advertising agreement with Macau Lotus Satellite TV Media Limited (“Lotus TV”), pursuant to which Lotus TV authorized CEM its exclusive agent to operate all of its advertising businesses (“Advertising Rights”).

The term of this agreement is ten years from September 1, 2010 to August 31, 2020. In consideration for Lotus TV’s grant of the Advertising Rights, CEM agreed to pay Lotus TV a fixed fee on an annual basis regardless of the total amount of revenues generated from the advertising business to be received by CEM. Under the agreement, CEM paid Lotus TV an initial annual fee of HK$1,000,000 for the first year of the agreement, which will increase at 10% every year for the following six years.

CEM also agreed to extend to Lotus TV, interest free, a credit facility consisting of a series of loans totaling a minimum of US$10 million (amended to US$15 million on June 13, 2014) over a period of ten years. The terms of each loan and the increase of the annual fee after the first three years of the agreement will be renegotiated by the parties. As of March 31, 2015, the loan balance to Lotus TV was approximately $10.14 million US dollars under this agreement.

As an advertising agent, the Company operates as an advertising agent to place and handle advertising for its clients. The Company’s revenues are derived primarily from advertising placement and sale of advertising time obtained from Lotus TV.

All of our clients have created and produced their own advertising clips and trailers, or programs, we currently act only as an advertising placement agent for Lotus TV, and there is no advertising creating and planning activities involved at this time. Advertisers can purchase advertising time slots of Lotus TV directly from the Company.

Results of Operations

For the Three Months ended March 31, 2015 Compared to 2014

Operating Revenues

The following table presents a breakdown of our operating revenues among advertising revenues and revenue from TV program, i.e., revenue from sale of the advertising TV time obtained from Lotus TV:


	For the Three Month Ended March 31,
	2015				2014
	Amount		%		Amount		%
Operating revenues:
Advertising revenue	$	58,023	100	.0 %	$	48,333	100.0	%
TV Program	-		0.0	%	-		0.0	%
Total operating revenues	$	58,023	100.0	%	$	48,333	100.0	%

In October 2014, the Company received an advance payment of $231,660, and in January 2014, an advance payment of $193,394 under a contract to provide advertising for all of 2014. During the three months ended March 31, 2015 and 2014, the Company recognized revenue of $58,023 and $48,433, respectively, related to the contract. At March 31, 2015, $174,092 of deferred revenue was recorded related to the contact.

Operating expenses

The following table presents a breakdown of our operating expenses:


	For the Three Month Ended March 31,
	2015				2014
	Amount		%		Amount		%
Operating expense:
License fee	$	47,195		%	$	42,887	17.2	%
Amortization of advertising right assets	72,545			%	136,830		54.9	%
Other general and administrative	46,967			%	62,293		27.9	%
Total operating expenses	$	166,707	100.0	%	$	249,010	100.0	%

Operating expenses for the three months ended March 31, 2015 were $166,707, as compared to $249,010 for the same period of 2014. The decrease in operating expenses was mainly due to decrease in other general and administrative expenses.

Other income (expenses)

Our total other expenses for the three months ended March 31, 2015 was $102,182, which consisted of interest income. For the same period of 2014, the other expense was $167,424, which consisted of interest income.

Net income (loss)

For the three months ended March 31, 2015, the Company had a net loss of $6,502, or $0.00 per share, as compared to a net loss of $33,251, or $0.00 per share, for the same period of prior year.

Liquidity and Capital Resources

Cash flow information is as follows:


	Three Months Ended March 31,
	2015		2014
Cash provided by (used in):
Operating activities	$	(38,863)	$	151,552
Investing activities		(2,375)		(1,007,478)
Financing activities		-		-
Effect of exchange rate on cash and cash equivalents		462		(1,093)
Net increase (decrease) in cash and cash equivalents	$	(40,776)	$	(857,019)

At March 31, 2015, the Company had a cash balance of $600,738. For the three months ended March 31, 2015, the operating activities of the Company used net cash of $38,863, as compared to net cash generated by the operating activities of $151,552 for the prior year. Cash used in 2015 operating activities resulted primarily from the following: current year net loss of $6,502; the net decrease in operating assets and liabilities of $2,732; and non-cash operating outflows of $29,629.

For the three months ended March 31, 2015, the Company used net cash $2,375 for investing in trademark in its investing activities, compared to $1,007,478 of net cash used in the same period of 2014. The cash used in the three months ended March 31, 2014 was primarily a result of the additional loan to Lotus TV in February 2014.

For the three months ended March 31, 2015 and 2014, there were no financing activities.

On January 30, 2013, the Company entered into a Securities Purchase Agreement with certain investors in a private placement. Pursuant to the agreement, the Company agreed to issue and investors agreed to purchase an aggregate of 183 million shares of the Company's common stock, at a price of $0.03 per share, for an aggregate consideration of $5,490,000 in cash. As to date, there were 24 million shares of the Company’s common stock issued.

In our opinion, our available funds and revenues generated from our operation may not able to satisfy our capital requirements for the next 12 months, and we may need to raise additional funds to meet our needs and to pursue growth opportunities. We may raise funds through private placements, either in equity offerings, or interest bearing borrowings. There is no guarantee that we will be able to raise additional funds through offerings or other sources. If we are unable to raise funds, our ability to continue with operations will be materially hindered.

Off-Balance Sheet Arrangements

None.

Commitments

On August 26, 2010, CEM International Ltd. entered into an Advertising Agreement with Lotus TV, pursuant to which Lotus TV authorized CEM as its exclusive agent to operate all of its advertising business, and to be entitled to all the revenues generated therefrom (“Advertising Rights”). On November 25, 2014, CEM amended the 2010 Agreement and forego its exclusive advertising rights but remain as Lotus TV’s preferred advertising agent.

The term of this Agreement is 10 years from September 1, 2010 to August 31, 2020. In consideration for Lotus TV’s grant of the Advertising Rights, CEM agrees to pay Lotus TV a fixed annual fee every year (the “Annual Fee”) regardless of the total amount of advertising revenues received by CEM. Under the Agreement, CEM paid Lotus TV an initial Annual Fee of $1,000,000 Hong Kong dollars (approximately US$128,900) for the first year of the Agreement, which Annual Fee will increase at 10% every year until 2017. The amount of Annual Fee payable at March 31, 2015 and December 31, 2014 was $110,137 and $62,910, respectively.

CEM also agrees to extend to Lotus TV, interest free, a credit facility consisting of a series of loans (each a “Loan”) totaling a minimum of US$15 million over a period of 10 years. The terms of each Loan and the increase of Annual Fee after the first three years of the Agreement will be renegotiated by the parties. The Company currently expects that the

loans will be originated from its cash reserve, advertising revenue and, if necessary, raised from the capital market. On November 25, 2014, Lotus TV agreed to accelerate its repayment of its outstanding loan balance with CEM in annual installments of $2,000,000 cash starting in 2015 until the remaining balance is paid in full.

License fee expense for the three months ended March 31, 2015 and 2014 was $47,195 and $42,887, respectively, and was included in selling, general and administrative expenses.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, such as doubtful accounts, inventories, and impairment of long-lived assets. Management bases its estimates and judgments on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The accounting policies that we follow are set forth in Note 2 to our financial statements as included in this report. These accounting policies conform to accounting principles generally accepted in the United States, and have been consistently applied in the preparation of the financial statements.

Inflation

In general, our costs are affected by inflation and we may experience the effects of inflation in future periods. Such effects have not been material to us in the past and we believe will not materially affect us in the future.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to foreign currency fluctuations and changes in the market values of our investments in gold bullion.

Foreign Exchange Risk

The functional currency of our subsidiary in Macau is the Hong Kong dollar. The results of operations of, and certain of our intercompany balances associated with, are exposed to foreign exchange rate fluctuations. Upon consolidation, as exchange rates vary, net sales and other operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. During the three months ended March 31, 2015 and 2014 and through this date, there has been no significant fluctuation in exchange rates between Hong Kong dollars and US dollars. However, future fluctuations in exchange rates may adversely affect our expenses and results of operations as well as the value of our assets and liabilities. Any significant fluctuations in the exchange rate between the Hong Kong dollar and the United States dollar may bring down our operating income and lower our stock price. We have no current plans to undertake any hedging activity to minimize exchange rate fluctuations.

Investment Risk

We do not own any derivative financial instruments. Accordingly, we do not believe there is any material market risk exposure with respect to derivatives or other financial instruments that require disclosure under this item.

Item 4T. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our CEO and CFO concluded that, as of March 31, 2015, our disclosure controls and procedures were effective at providing reasonable assurance that information required to be disclosed by us in reports filed or submitted

under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that our controls and procedures are effective in timely alerting them to material information required to be included in this report.

(b) Changes in control over financial reporting

There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits

(a) Exhibits:

Exhibit No. Title of Document

31.1 Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CREDIT ONE FINANCIAL, INC.

By: /s/ Dicky Cheung

Dicky Cheung

President, Chief Executive Officer and Chief Financial Officer

May 11, 2015

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