UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

 

FORM 10-Q

 

☑ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from ______ to _______

 

Commission File Number 000-53737

 

AJ GREENTECH HOLDINGS, LTD.

 

(Exact name of registrant as specified in its charter)

Nevada

(State of incorporation)

 

136-20 38th Ave. Unit 3G

Flushing, NY 11354

(Address of Principal Executive Offices)

 _______________

 

718-395-8706 
(Issuer Telephone number)

_______________

 

 

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data 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  ☑  No ☐ 

 

Indicate by check mark whether the registrant is a larger accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one) 

Large accelerated filer ☐	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 ☑

 

At March 31, 2015, there were 233,760,148 shares of the registrant's common stock issued and outstanding.

 

AJ GREENTECH HOLDINGS, LTD.

FORM 10-Q

March 31, 2014

INDEX

 

PART I-- FINANCIAL INFORMATION

 

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Control and Procedures	19

 

 

 

PART II-- OTHER INFORMATION

 

Item 1	Legal Proceedings	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
SIGNATURES		22

 

 

AJ Greentech Holdings, Ltd.

March 31, 2015 and 2014

Index to the consolidated financial statements

 

Contents	Page(s)
Consolidated Balance Sheets at March 31, 2015 (Unaudited) and December 31, 2014	F-2
Consolidated Statements of Income and Comprehensive Income for the three Months Ended March 31, 2015 and 2014 (Unaudited)	F-3
Consolidated Statements of Cash Flows for the three months Ended March 31, 2015 and 2014(Unaudited)	F-4
Notes to the Consolidated Financial Statements	F-5

 

AJ Greentech Holdings Ltd.
Consolidated Balance Sheets (Unaudited)
		March 31, 2015				December 31,2014
ASSETS
CURRENT ASSETS:
Cash			127,137				198,906
Accounts receivable			1,112,326				1,147,697
Inventories			158,246				59,245
Short-term investments			496,000				519,750
Prepayments and other current assets			4,019				1,544
Total Current Assets			1,897,728				1,927,142
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment			1,106,500				1,089,211
Accumulated depreciation			(23,693	)			(21,137	)
PROPERTY, PLANT AND EQUIPMENT, net			1,082,807				1,068,074
OTHER ASSETS			5,568				5,481
Total Assets			2,986,103				3,000,697
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Borrowings			531,200				538,675
Accounts payable			570,912				559,903
Advances from customers			80,196				78,943
Advances from related parties			169,053				583,227
Taxes payable			26,455				4,954
Accrued expenses and other current liabilities			55,459				54,592
Total Current Liabilities			1,433,275				1,820,294
LONG TERM DEBT			763,630				506,620
Total Liabilities			2,196,905				2,326,914
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock (($0.001 par value; 394,500,000 shares authorized; 233,760,148 and 233,760,148 shares issued and outstanding at March 31, 2015 and December 31, 2014)			233,760				233,760
Additional paid-in capital			117,168				117,168
Retained earnings (Deficit)			(412,229	)			(513,846	)
Foreign currency translation gain (loss)			850,499				836,701
Total Stockholders' Equity			789,198				673,783
Total Liabilities and Stockholders' Equity			2,986,103				3,000,697

 

See accompanying notes to the consolidated financial statements.

 

 

AJ Greentech Holdings Ltd.
Consolidated Statements of Operations and Comprehensive Income (Unaudited)
			The three months ended Mar. 31, 2015				The three months ended Mar. 31, 2014
NET REVENUES			1,027,816				269,431
COST OF REVENUES			858,791				233,172
GROSS PROFIT			169,025				36,259
OPERATING EXPENSES:
Selling and general and administrative expenses			36,806				18,416
Total operating expenses			36,806				18,416
Income from interest			—				—
Interest Expense			9,693				2,862
Other Income (expenses)			(95	)			—
INCOME (LOSS) BEFORE INCOME TAXES			122,431				14,981
INCOME TAX PROVISION			20,813				—
NET INCOME (LOSS)			101,618				14,981
OTHER COMPREHENSIVE INCOME:
Foreign currency translation gain (loss)			13,798				49,750
COMPREHENSIVE INCOME			115,416				64,731
NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
Net loss per common share - basic and diluted			0.00				(0.00	)
Weighted Average Common Shares Outstanding - basic and diluted			233,760,148				233,760,148

 

 See accompanying notes to the consolidated financial statements.

 

AJ Greentech Holdings Ltd.
Consolidated Statements of Cash Flows
(Unaudited)
			The three months ended Mar. 31, 2015				The three months ended Mar. 31, 2014
Operating Activities, Cash Flows Provided By or Used In
Net income			101,618				14,981
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation			2,200				—
Amortization			—				—
Loss on sale of PPE			—				—
Interest Received			—				—
Interest Paid			9,693				—
Changes In operating assets and liabilities:
Accounts Receivables			35,371				645,309
Inventories			(99,001	)			(111,690	)
Prepayments Other Current Assets			(2,475	)			(611	)
Accrued Expenses and Other Current Liabilities			867
Accounts Payables			11,009				(589,216	)
Tax Payables			21,501				(6,633	)
Advances			1,253				—
Total Cash Flow Provided by (Used in) Operating Activities			82,036				(47,860	)
Investing Activities, Cash Flows Provided By or Used In
Short term investment			23,750				—
Other assets			87				—
Total Cash Flows Provided by (Used in) Investing Activities			23,837				—
Financing Activities, Cash Flows Provided By or Used In
Issuance of common stock			—				—
Advances from (repayment made to) related parties			(414,174	)			(78,865	)
Capital contribution			—				—
Long term debt increased (repayment)			257,010				—
Net Borrowings			(7,475	)			—
Interest received			—				—
Interest paid			(9,693	)			—
Total Cash Flows Used in Financing Activities			(174,332	)			(78,865	)
Effect Of Exchange Rate Changes			(3,310	)			(2,497	)
Change In Cash and Cash Equivalents			(71,769	)			(129,221	)
Cash at beginning of the period			198,906				140,987
Cash at end of the period			127,137				11,766
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Interest paid			9,693				2,862
Income tax paid			—				—

    

See accompanying notes to the consolidated financial statements.

 

 

AJ Greentech Holdings, Ltd.

March 31, 2015 and 2014

Notes to the Consolidated Financial Statements

(Unaudited)

 

Note 1 – Organization and Basis of presentation

 

Organization

 

AJ Greentech Holdings Ltd. is a Nevada corporation incorporated on August 30, 2006, under the name Gateway Certifications, Inc.  On November 16, 2009, our corporate name was changed to American Jianye Greentech Holdings, Ltd. and on February 13, 2014, our corporate name was changed to AJ Greentech Holdings, Ltd.

 

From November 2009 until October 2013, through our China subsidiaries, we were engaged in design, marketing and distributing of alcohol base clean fuel that are designed to use less fossil fuel and have less pollution than traditional fuel.  

 

On October 31, 2013, pursuant to agreements with one of our former directors, we transferred the stock in our China subsidiaries to the former director in exchange for cancellation of debt totaling $240,000.  As a result of the transfer of the subsidiaries, we were no longer engaged in the China cleanfuel business.  We transferred the stock of the China subsidiaries because we felt that, it not our best interest to continue China cleanfuel business as a result of our decreasing revenue, continued losses and inability to raise capital for our business

 

On October 31, 2013, Chu Li An acquired, for nominal consideration, 8,000,000 shares of common stock from the director who acquired the subsidiaries and 12,778,399 shares of common stock from The Chairman, who was also a director.  On November 1, 2013, Chu Li An and the Company entered into a loan agreement pursuant to which the Chu Li An agreed to lend us $100,000 initially with future loan amount up to $1,000,000, for which we will issue our 6% demand promissory note in the principal amount of $100,000.  As of March 31, 2015, the note has not been issued.

 

On November 18, 2013, we entered into agreement pursuant to which we issued to Chu Li An and her BVI company, our sole director and chief executive officer, 180,000,000 shares of common stock, in consideration of the cancellation of debt due to Chu Li An in the amount of $180,000.

 

On November 30, 2013, the company entered into an agreement to acquire all of the issued and outstanding stock of Jin Chih International, Ltd., a Taiwan corporation, from its sole owner Chu Li An for five million shares of the Company’s common stock. As of March 31, 2015, the stock has not been issued.

 

As a result of the above transactions, we carry out the electronic products and general cargo trading and related consulting service business through our subsidiary named Jin Chih International, Ltd in Taiwan. We still plan to focus on providing greentech products outside of China in future. Even though the company has disposed China branches, the company's new management will continue to expand the current green energy and technology business in the United States and globally, at the same time to explore many other green and renewable energy such as solar, wind power, sea power by signing licensing agreement or joint venture with other research institutes.

 

Basis of presentation

 

The accompanying unaudited consolidated financial statements of AJ Greentech Holdings Ltd. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.

 

Segment Information

 

ASC 280 requires companies to report information about operating segment in interim and annual financial statements. It also requires segment disclosures about products and services geographic and major customers. The Company has determined that it does not have any separately reportable operating segments.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

 

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.

 

Inventories

 

The Company values inventories, consisting of raw materials, packaging material and finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method for raw materials and packaging materials and the weighted average cost method for finished goods. Cost of finished goods comprises direct labor, direct materials, direct production cost and an allocated portion of production overhead. The Company reduces inventories for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv)new product introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.

 

The Company evaluates its current level of inventories considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventories to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. Other significant estimates include the allocation of variable and fixed production overheads. While variable production overheads are allocated to each unit of production on the basis of actual use of production facilities, the allocation of fixed production overhead to the costs of conversion is based on the normal capacity of the Company’s production facilities, and recognizes abnormal idle facility expenses as current period charges. Certain costs, including categories of indirect materials, indirect labor and other indirect manufacturing costs which are included in the overhead pools are estimated. The management of the Company determines its normal capacity based upon the amount of operating hours of the manufacturing machinery and equipment in a reporting period.

 

Revenue Recognition

 

The Company’s revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). Revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.   Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.

  

The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed acknowledgement of receipt from the customers or a signed bill of lading from the third party trucking company and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

 

The Company markets and distributes electronic products and general cargo for automobile use and follows Section 605-45-45 (formerly EITF 99-19) (“ASC Section 605-45-45”) of the FASB Accounting Standards Codification for revenue recognition to report revenue gross as a principal for its sales since the Company (1) acts as principal in the transaction, (2) takes title to the products, (3) has risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and (4) does not act as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis on its sales. The management of the Company determined that the Company should report revenue based on the gross amount billed to a customer when considering each of the following eight (8) indicators of gross revenue reporting listed in ASC Paragraph 605-45-45-4 through 605-45-45-14 as specified (1) The entity is the primary obligor in the arrangement — The Company signs a product sales agreement with its customer and represents in writing that the Company is responsible for fulfillment, including the acceptability of the product(s) or service(s) ordered or purchased by the customer; (2) The entity has general inventory risk (before customer order is placed or upon customer return); (3) The entity has latitude in establishing price — The Company has reasonable latitude, within economic constraints, to establish the exchange price with a customer for the product or service; (4) The entity changes the product or performs part of the service — The Company developed a method for blending the raw materials in its manufacturing process, through its proprietary technology, catalysts can be mixed with fuel and alcohols to become a finished product to be sold after pumping and piping; (5) The entity has discretion in supplier selection — The Company has multiple suppliers for the products ordered by a customer and discretion to select the supplier that will provide the product(s) or service(s) ordered by a customer; (6) The entity is involved in the determination of product or service specifications — The Company determines the nature, type, characteristics, or specifications of the product(s) or service(s) ordered by the customer; (7) The entity has physical loss inventory risk of purchased inventories after customer order; and (8) The entity has credit risk — The Company is responsible for collecting the sales price from its customer but must pay the amount owed to its supplier after the supplier performs, regardless of whether the sales price is fully collected.

 

Net sales of products represent the invoiced value of goods, net of value added taxes (“VAT”). The Company is subject to VAT which is levied on all of the Company’s products at the rate of 5% on the invoiced value of sales. Sales or Output VAT is borne by customers in addition to the invoiced value of sales and Purchase or Input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

 

Fair Value of Financial Instruments

 

The fair values of the Company’s accrued expenses and other current liabilities approximate their carrying values due to the relatively short maturities of these instruments. The carrying value of the Company’s short and long term debt approximates fair value based on management’s best estimate of the interest rates that would be available for similar debt obligations having similar terms at the balance sheet date.

 

Impairment of Long-Lived Assets

 

The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, Property, Plant and Equipment. The Company periodically evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

 

The assumptions used by management in determining the future cash flows are critical. In the event these expected cash flows are not realized, future impairment losses may be recorded.

   

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.

 

The Company adopted ASC 740-10-25, Income Taxes- Overall-Recognition, on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.

 

Net Income (Loss) per Share

 

The Company calculates its basic and diluted earnings per share in accordance with ASC 260. Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive warrants and options and convertible securities. 

 

Translation Adjustment

 

The Company’s financial statements are presented in the U.S. dollar ($), which is the Company’s reporting and functional currency. The functional currency of the Company’s subsidiaries is TWD. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations. Monetary assets and liabilities denominated in foreign currency are translated at the functional currency rate of exchange prevailing at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the statements of operations.

 

In accordance with ASC 830, Foreign Currency Matters, the Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from TWD into U.S. dollar are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for the financial statements in accordance with ASC 830, Foreign Currency Matters, are as follows:

 

Average Rate for the three months ended on:		March 31, 2015				March 31, 2014
Taiwan dollar (TWD)			1				1
United States dollar ($)			0.0317				0.0330
Exchange Rate at			March 31, 2015				December 31, 2014
Taiwan dollar (TWD)			1				1
United States dollar ($)			0.0320				0.0315

 

Comprehensive Income (Loss)

 

Comprehensive income (loss) includes accumulated foreign currency translation gains and losses with respect to the spun-off entities and the operating entity in Taiwan.

 

Recently Issued Accounting Pronouncements

 

In May 2014, the FASB issued the FASB Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).

 

This guidance amends the existing FASB Accounting Standards Codification, creating a new Topic 606, Revenue from Contracts with Customer. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

 

To achieve that core principle, an entity should apply the following steps:

 

1. Identify the contract(s) with the customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue when (or as) the entity satisfies a performance obligations

 

The ASU also provides guidance on disclosures that should be provided to enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue recognition and cash flows arising from contracts with customers.

 

Qualitative and quantitative information is required about the following:

 

1. Contracts with customers – including revenue and impairments recognized, disaggregation of revenue, and information about contract balances and performance obligations (including the transaction price allocated to the remaining performance obligations)
2. Significant judgments and changes in judgments – determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and amounts allocated to performance obligations
3. Assets recognized from the costs to obtain or fulfill a contract.

 

ASU 2014-09 is effective for periods beginning after December 15, 2016, including interim reporting periods within that reporting period for all public entities.  Early application is not permitted.

 

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.

 

The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

 

The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations.

 

Finally, the amendments remove paragraph 810-10-15-16. Paragraph 810-10-15-16 states that a development stage entity does not meet the condition in paragraph 810-10-15-14(a) to be a variable interest entity if (1) the entity can demonstrate that the equity invested in the legal entity is sufficient to permit it to finance the activities that it is currently engaged in and (2) the entity’s governing documents and contractual arrangements allow additional equity investments.

 

The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage.

 

The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein.

 

Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915.

 

In June 2014, the FASB issued the FASB Accounting Standards Update No. 2014-12 “Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”).

 

The amendments clarify the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period.  The Update requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.

 

The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted.

 

In August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).

 

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

 

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):

 

a.

Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)

b.

Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations

c.

Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:

 

a.

Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern

b.

Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations

c.

Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

 

Note 3 – Going Concern

 

There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support the Company’s working capital requirements. To the extent that funds generated from any private placements, public offering and/or bank financing are insufficient to support the Company’s working capital requirements, the Company will have to raise additional working capital from additional financing. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available, the Company may not be able continue its operations.

 

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 4 – Accounts Receivable

 

Accounts receivable at March 31, 2015 and December 31, 2014 consisted of the following:

 

		March 31, 2015				December 31, 2014
Accounts receivable		$	1,112,326			$	1,147,697
Allowance for doubtful accounts			—				—
		$	1,112,326			$	1,147,697

 

Note 5 – Short term investment

 

For the year ended December 31, 2014, the Company purchased 1,600,000 shares per $10TWD issued by GaoPing XiNeng electric power Co., Ltd and 50,000 shares per $10TWD issued by YangXin commercial bank Co., Ltd.

 

For the period ended March 31, 2015, the Company sold out 100,000 shares per $10TWD of GaoPing XiNeng electric power Co., Ltd.

 

Note 6 – Property, Plant and Equipment

 

Property, plant and equipment, stated at cost, less accumulated depreciation at December 31, 2014 and 2013 consisted of the following:

 

		March 31, 2015				December 31, 2014
Land		$	742,213			$	730,616
Buildings			364,287				358,595
Office equipments			—				—
			1,106,500				1,089,211
Less: Accumulated depreciation			(23,693	)			(21,137	)
Total		$	1,082,807			$	1,068,074

 

For the three months ended March 31, 2015 and 2014, the Company recorded depreciation expense of $2,556 and $0, respectively.

 

Note 7 – Prepayments and other current assets

 

		March 31, 2015				December 31, 2014
Advance on purchase		$	—			$	—
Prepayments			4,019				1,544
		$	4,019			$	1,544

 

Note 8 - Borrowing

 

			March 31, 2015			Term			Int. Rate/Year
Number one commercial bank		$	57,600			Jan.28,2015 to Jul.28,2015			3.675	%
Number one commercial bank			134,400			Jan.28,2015 to Jul.28,2015			3.68	%
GuoTai ShiHua bank			90,304			Nov.18,2014 to Nov.18,2015			5.28	%
GuoTai ShiHua bank			42,816			Nov.18,2014 to Nov.18,2015			5.28	%
Long term debt -the term less than 1 year			206,080			Repaid before Mar.31,2016
Total		$	531,200

 

			December 31, 2014			Term			Int. Rate/Year
Number one commercial bank		$	56,700			Jul.28,2014 to Jan.28,2015			3.675	%
Number one commercial bank			132,300			Jul.28,2014 to Jan.28,2015			3.68	%
GuoTai ShiHua bank			101,178			Nov.18,2014 to Nov.18,2015			5.28	%
GuoTai ShiHua bank			42,147			Nov.18,2014 to Nov.18,2015			5.28	%
Long term debt -the term less than 1 year			206,350			Repaid before Dec.31,2015
Total		$	538,675

 

The long term debt should be repaid as equal principal by month. The long term debt -the term less than 1 year represented the amount should be repaid within 1 year.

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

The total amount advance from related parties consisted of the advance from shareholders for the investment, working capital and the expense. The balance was $169,053 and $583,227 as of March 31, 2015 and December 31, 2014, respectively.

 

During the three months ended March 31, 2015, the Company returned $414,174 to shareholder, Chu Li An.

 

NOTE 10 – LONG TERM DEBT

 

			March 31, 2015			Term			Int. Rate/Year
Number one commercial bank		$	494,855			Feb.28,2013 to Jan.29,2028			2.62	%
YangXin commercial bank			119,782			Dec.3,2012 to Sep.26,2016			5.30	%
YangXin commercial bank			43,925			Oct.27,2013 to Sep.26,2016			5.30	%
YangXin commercial bank			311,148			Jan.21,2015 to Jan.21,2018			3.80	%
Long term debt -the term less than 1 year			(206,080	)		Repaid before Mar.31,2016
Total		$	763,630

 

			December 31, 2014			Term			Int. Rate/Year
Number one commercial bank		$	495,082			Feb.28,2013 to Jan.29,2028			2.62	%
YangXin commercial bank			157,374			Dec.3,2012 to Sep.26,2016			5.30	%
YangXin commercial bank			57,024			Oct.27,2013 to Sep.26,2016			5.30	%
TaiWan medium-sized and small enterprises bank			3,490			Feb.26,2010 to Jan.26,2015			2.62	%
Long term debt -the term less than 1 year			(206,350	)		Repaid before Dec.31,2015
Total		$	506,620

 

The long term debt should be repaid as equal principal by month. The long term debt -the term less than 1 year represented the amount should be repaid within 1 year.

 

NOTE 11 – COMMON STOCK

 

On April 7, 2014, the shareholder, Chu Li An contributed $165,500 capital to the Company.

 

The Company’s capitalization is 394,500,000 common shares with a par value of $0.001 per share. There are a total of 233,760,148 common shares issued and outstanding at March 31,2015 and December 31, 2014. No preferred shares have been authorized or issued.

 

NOTE 12 – INCOME TAX

 

The Company did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because the Company has experienced operating losses for U.S. federal income tax purposes since inception. When it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit.  The operating subsidiary is organized and located in the TaiWan and does not conduct any business in the United States.

 

Taxation on profits earned in the TaiWan has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the TaiWan where the Company operates after taking into account the benefits from any special tax credits or “tax holidays” allowed in the county of operations.

 

In accordance with the relevant tax laws in the TaiWan, the Company statutory rate were 17% and 17% for the three months ended March 31, 2015 and 2014, respectively. The income tax expense were $20,813 and nil for the three months ended March 31, 2015 and 2014, respectively.

 

NOTE 13 – FOREIGN OPERATIONS

 

Operations

 

Substantially all of the Company’s operations are carried out and all of its assets are located in the TaiWan. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the TaiWan. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, monetary policies, anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.

 

Dividends and Reserves

 

Under the laws of the TaiWan, net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative prior years’ losses, if any; (ii) allocations to the “Statutory Surplus Reserve” of at least 10% of net income after tax, as determined under TaiWan accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital; (iii) allocations of 5-10% of income after tax, as determined under TaoWan accounting rules and regulations, to the Company’s “Statutory Common Welfare Fund”, which is established for the purpose of providing employee facilities and other collective benefits to employees in PRC; and (iv) allocations to any discretionary surplus reserve, if approved by stockholders.

 

As of March 31, 2015, the Company had no Statutory Surplus Reserve and the Statutory Common Welfare Fund established and segregated in retained earnings.

 

 NOTE 14 –SUBSEQUENT EVENTS

 

The Company has performed an evaluation of subsequent events in accordance with ASC Topic 855 and the Company is not aware of any other subsequent events which would require recognition or disclosure in the financial statements.

 

Item 2. Management's Discussion and Analysis Of Financial Condition And Plan Of Operation.

 

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "management believes" and similar language. The forward-looking statements are based on the current expectations of the Company and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. Actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them.

 

Investors are also advised to refer to the information in our previous filings with the Securities and Exchange Commission (SEC), especially on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.

 

Overview

 

From November 2009 until October, 2013, through our China subsidiary, we were engaged in design, marketing and distributing of alcohol base clean fuel which are designed to use less fossil fuel and have less pollution than traditional fuel.  

 

On October 31, 2013, pursuant to agreements with one of our former directors, we transferred the stock in our China subsidiaries to the former director in exchange for cancellation of debt totaling $240,000.  As a result of the transfer of the subsidiaries, we were no longer engaged in the China cleanfuel business.  We transferred the stock of the China subsidiaries because we felt that, it's not our best interest to continue China cleanfuel business as a result of our decreasing revenue, continued losses and inability to raise capital for our business.

 

On November 30, 2013, the company entered into an agreement to acquire all of the issued and outstanding stock of Jin Chih International, Ltd., a Taiwan corporation, from its sole owner Chu Li An for five million shares of the Company’s common stock. As of March 31, 2015, the stock has not been issued.

 

As a result of the above transactions, we carry out the electronic products and general cargo trading and related consulting service business through our subsidiary named Jin Chih International, Ltd in Taiwan. We still plan to focus on providing greentech products outside of China in future. Even though the company has disposed China branches, the company's new management will continue to expand the current green energy and technology business in the United States and globally, at the same time to explore many other green and renewable energy such as solar, wind power, sea power by signing licensing agreement or joint venture with other research institutes.

 

Results of Operations

 

For the three months ended March 31, 2015, we derived our revenues of $1,027,816 compared to $269,431 for the three months ended March 31, 2014, representing an increase of $758,385. Our sales came from the electronic products and general cargo trading and related consulting service to our customers operated by the Taiwan subsidiary. The Company experienced major increase in revenues due to the corporate business development. During the three months ended March 31, 2014, we have only 3 mainly customers and we then continued to develop our trading market and increased our mainly customers to 8 during the period of 2015.

 

Selling, general and administrative expenses consist of primarily of payroll, local taxes, investor relation expenses and professional fees. Selling, general and administrative expenses for the three months ended March 31, 2015 were $36,806, comparing to $18,416 for the last period, representing an increase $18,390. The operating expense increased according to the sales increase.

 

Our business operates primarily in Taiwanese Dollars (“TWD”), but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from TWD to Dollars results in translation adjustments. While our net income is added to the retained earnings on our balance sheets; the translation adjustments are added to a line item on our balance sheets labeled “accumulated other comprehensive income,” since it is more reflective of changes in the relative values of U.S. and Taiwanese currencies than of the success of our business. During the three months ended March 31, 2015, the effect of converting our financial results to U.S. Dollars was to increase $13,798 to our accumulated other comprehensive income.

 

Liquidity and Capital Resources

 

Our operations to date have been funded primarily by operations, due from related parties and capital contributions.

 

At March 31, 2015 and December 31, 2014, we had cash and cash equivalents of $127,137 and $198,906, respectively. Our cash at March 31, 2015 was decreased by $71,769 from December 31, 2014.

 

Our current assets at March 31, 2015 were $1,897,728, compared to $1,927,142 at December 31, 2014. This decrease mainly reflects decreases in cash, accounts receivable, short-term investments and partially offset by increases in the inventories.

 

Our current liabilities at March 31, 2015 were $1,433,275, compared to $1,820,294 at December 31, 2014. This decrease mainly reflects a significant decrease of advanced from related party and partially offset by increase in account payable and tax payable.

 

Statements of Cash Flows

 

Our cash decreased $71,769 during the first three months of 2015, as compared to $129,221 during 2014. In the first three months of 2015, we obtained cash in the amount of $82,036 and $23,837 from operating activities and investing activities, we used cash the amounts of $174,332 in our financing activities. In the first three months of 2014, we used cash the amount of $47,860 and $78,865 in operating activities and financing activities.

 

Net Cash provided by (Used in) Operating Activities

 

Net cash provided by operating activities increase $129,896 from negative $47,860 in the first three months of 2014 to positive $82,036 in the first three months of 2015 was mainly comprised of the increase $86,637 net income from $14,981 in the first three months of 2014 to $101,618 in the first three months of 2015, depreciation and amortization increase $2,200 from $0 in the first three months of 2014 to $2,200 in the first three months of 2015, the interest paid increase $9,693 from $0 in the first three months of 2014 to $9,693 in the first three months of 2015, and the increase $31,366 from changes in operating assets and liabilities from negative $62,841 in the first three months of 2014 to negative $31,475 in the first three months of 2015.

 

Cash Provided by (Used in) Investing Activities

 

In the first three months of 2015, net cash provide by investing activities of $23,837 comprised of the decrease of $23,750 short-term investment and the $87 of other assets.

 

Cash Provided by (Used in) Financing Activities

 

In the first three months of 2015, cash used in financing activities of $174,332 consisted of the advance from related party repayment of $414,174, the repayment of borrowing and long term debt of 249,535 the interest paid of $9,693.

 

In the first three months of 2014, cash used in financing activities of $78,865 consisted of the advance from related party repayment of $78,865.

.

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

 

Critical Accounting Policies and Estimates

 

This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principle generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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.

 

A summary of significant accounting policies is included in Note 2 to the consolidated financial statements included in this Annual Report. Of these policies, we believe that the following items are the most critical in preparing our financial statements.

 

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

 

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any. Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.

 

Inventories

The Company values inventories, consisting of raw materials, packaging material and finished goods, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method for raw materials and packaging materials and the weighted average cost method for finished goods. Cost of finished goods comprises direct labor, direct materials, direct production cost and an allocated portion of production overhead. The Company reduces inventories for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv)new product introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.

 

The Company evaluates its current level of inventories considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventories to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. Other significant estimates include the allocation of variable and fixed production overheads. While variable production overheads are allocated to each unit of production on the basis of actual use of production facilities, the allocation of fixed production overhead to the costs of conversion is based on the normal capacity of the Company’s production facilities, and recognizes abnormal idle facility expenses as current period charges. Certain costs, including categories of indirect materials, indirect labor and other indirect manufacturing costs which are included in the overhead pools are estimated. The management of the Company determines its normal capacity based upon the amount of operating hours of the manufacturing machinery and equipment in a reporting period.

 

Revenue Recognition

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

The Company derives its revenues from sales contracts with customers with revenues being generated upon the shipment of merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed acknowledgement of receipt from the customers or a signed bill of lading from the third party trucking company and title transfers upon shipment, based on free on board (“FOB”) warehouse terms; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

 

The Company markets and distributes electronic products and general cargo for automobile use and follows Section 605-45-45 (formerly EITF 99-19) (“ASC Section 605-45-45”) of the FASB Accounting Standards Codification for revenue recognition to report revenue gross as a principal for its sales since the Company (1) acts as principal in the transaction, (2) takes title to the products, (3) has risks and rewards of ownership, such as the risk of loss for collection, delivery, or returns, and (4) does not act as an agent or broker (including performing services, in substance, as an agent or broker) with compensation on a commission or fee basis on its sales. The management of the Company determined that the Company should report revenue based on the gross amount billed to a customer when considering each of the following eight (8) indicators of gross revenue reporting listed in ASC Paragraph 605-45-45-4 through 605-45-45-14 as specified (1) The entity is the primary obligor in the arrangement — The Company signs a product sales agreement with its customer and represents in writing that the Company is responsible for fulfillment, including the acceptability of the product(s) or service(s) ordered or purchased by the customer; (2) The entity has general inventory risk (before customer order is placed or upon customer return); (3) The entity has latitude in establishing price — The Company has reasonable latitude, within economic constraints, to establish the exchange price with a customer for the product or service; (4) The entity changes the product or performs part of the service — The Company developed a method for blending the raw materials in its manufacturing process, through its proprietary technology, catalysts can be mixed with fuel and alcohols to become a finished product to be sold after pumping and piping; (5) The entity has discretion in supplier selection — The Company has multiple suppliers for the products ordered by a customer and discretion to select the supplier that will provide the product(s) or service(s) ordered by a customer; (6) The entity is involved in the determination of product or service specifications — The Company determines the nature, type, characteristics, or specifications of the product(s) or service(s) ordered by the customer; (7) The entity has physical loss inventory risk of purchased inventories after customer order; and (8) The entity has credit risk — The Company is responsible for collecting the sales price from its customer but must pay the amount owed to its supplier after the supplier performs, regardless of whether the sales price is fully collected.

 

Net sales of products represent the invoiced value of goods, net of value added taxes (“VAT”). The Company is subject to VAT which is levied on all of the Company’s products at the rate of 5% on the invoiced value of sales. Sales or Output VAT is borne by customers in addition to the invoiced value of sales and Purchase or Input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

 

Foreign Currency Translation

The Company follows Section 830-10-45 of the FASB Accounting Standards Codification (“Section 830-10-45”) for foreign currency translation to translate the financial statements of the foreign subsidiary from the functional currency, generally the local currency, into U.S. Dollars. Section 830-10-45 sets out the guidance relating to how a reporting entity determines the functional currency of a foreign entity (including of a foreign entity in a highly inflationary economy), re-measures the books of record (if necessary), and characterizes transaction gains and losses. the assets, liabilities, and operations of a foreign entity shall be measured using the functional currency of that entity. An entity’s functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment, or local currency, in which an entity primarily generates and expends cash.

 

The functional currency of each foreign subsidiary is determined based on management’s judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures, would be considered the functional currency, but any dependency upon the parent and the nature of the subsidiary’s operations must also be considered. If a subsidiary’s functional currency is deemed to be the local currency, then any gain or loss associated with the translation of that subsidiary’s financial statements is included in accumulated other comprehensive income. However, if the functional currency is deemed to be the U.S. Dollar, then any gain or loss associated with the re-measurement of these financial statements from the local currency to the functional currency would be included in the consolidated statements of income and comprehensive income (loss). If the Company disposes of foreign subsidiaries, then any cumulative translation gains or losses would be recorded into the consolidated statements of income and comprehensive income (loss). If the Company determines that there has been a change in the functional currency of a subsidiary to the U.S. Dollar, any translation gains or losses arising after the date of change would be included within the statement of income and comprehensive income (loss).

 

Based on an assessment of the factors discussed above, the management of the Company determined the relevant subsidiaries’ local currencies to be their respective functional currencies.

 

The financial records of the Company's Taiwan operating subsidiaries acquired on November 30, 2013 are maintained in their local currency, the “TWD”, which is also the functional currency. Assets and liabilities are translated from the local currency into the reporting currency, U.S. dollars, at the exchange rate prevailing at the balance sheet date. Revenues and expenses are translated at weighted average exchange rates for the period to approximate translation at the exchange rates prevailing at the dates those elements are recognized in the consolidated financial statements. Foreign currency translation gain (loss) resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining accumulated other comprehensive income in the consolidated statement of stockholders’ equity.

 

Most Recent accounting pronouncements

 

Refer to note 2 in the accompanying consolidated financial statements.

 

Impact of Accounting Pronouncements

 

There were no recent accounting pronouncements that have had a material effect on the Company’s financial position or results of operations.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not required for smaller reporting companies.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2015. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2015, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

 

In light of the material weaknesses described below, we performed additional analysis to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

 

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 2) or combination of control deficiencies that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following two material weaknesses which have caused management to conclude that, as of March 31, 2015, our disclosure controls and procedures were not effective at the reasonable assurance level:

 

1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the quarter ending March 31, 2015. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

2. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

 

Management's Report on Internal Control over Financial Reporting.

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company in accordance with as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the (i) effectiveness and efficiency of operations, (ii) reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and (iii) compliance with applicable laws and regulations. Our internal controls framework is based on the criteria set forth in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified some material weaknesses in our internal control over financial reporting.

 

We lack sufficient personnel with the appropriate level of knowledge, experience and training in the application of accounting operations of our company. This weakness causes us to not fully identify and resolve accounting and disclosure issues that could lead to a failure to perform timely internal control and reviews.

 

Management is currently reviewing its staffing and systems in order to remedy the weaknesses identified in this assessment. However, because of the above condition, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of March 31, 2015. Additionally, the Registrant’s management has concluded that the Registrant has a material weakness associated with its U.S. GAAP expertise.

 

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

  

Management's Remediation Initiatives

 

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:

 

We intend to our personnel resources and technical accounting expertise within the accounting function. First, we intend to create a position to segregate duties consistent with control objectives of having separate individuals perform (i) the initiation of transactions, (ii) the recording of transactions and (iii) the custody of assets. Second, we intend to create a senior position to focus on financial reporting and standardizing and documenting our accounting procedures with the goal of increasing the effectiveness of the internal controls in preventing and detecting misstatements of accounting information. Third, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us. We anticipate the costs of implementing these remediation initiatives will be approximately $37,500 to $50,000 a year in increased salaries, legal and accounting expenses.

 

Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

To the best knowledge of the officers and directors, the Company was not a party to any legal proceeding or litigation as of March 31, 2015.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities. 

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1		Chief Executive Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Chief Financial Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
32.2		Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002
101		The following materials from AJ Greentech Holdings, Ltd.’s Quarterly Report on Form 10-Q for the period ended March 31, 2015 are formatted in eXtensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheet; (ii) the Condensed Consolidated Statement of Operations;, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements. This Exhibit 101 is deemed not filed for purposes of Sections 11 or 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections

 

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.

 

	AJ GREENTECH HOLDINGS LTD.
Date: May 29, 2015	By:	/s/ Chu Li An
		Chu Li An Chief Executive Officer

 

	AJ GREENTECH HOLDINGS LTD.
Date: May 29, 2015	By:	/s/ Chu Li An
		Chu Li An Chief Financial Officer

 

 

 

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