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EX-32 - CERTIFICATION - AREM PACIFIC Corp | ex32b.htm |
EX-32 - CERTIFICATION - AREM PACIFIC Corp | ex32a.htm |
EX-31 - CERTIFICATION - AREM PACIFIC Corp | ex31b.htm |
EX-31 - CERTIFICATION - AREM PACIFIC Corp | ex31a.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 September 30, 2016
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number: 333-207099
Arem Pacific Corporation |
(Exact name of small business issuer as specified in its charter) |
|
Delaware |
| 80000 |
(State or other jurisdiction of incorporation or organization) |
| (Primary Standard Industrial Classification Number) |
247 Mount Pleasant Road Nunawading, Victoria Australia 3131 (Address of principal executive offices) |
+61 433-783588 |
(Issuer's telephone number) |
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Large accelerated filer o | Non-accelerated filer o | Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 246,016,947 common shares issued and outstanding as of November 14, 2016.
AREM PACIFIC CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
AREM PACIFIC CORPORATION
Condensed Consolidated Balance Sheets
As at September 30, 2016 and June 30, 2016
|
| As at September 30 |
| As at June 30 |
| Note | 2016 |
| 2016 |
|
| (unaudited) |
| (audited) |
Assets |
|
|
|
|
Cash and cash equivalents | 4 | $59,671 |
| $39,769 |
Other assets | 5 | 24,648 |
| 23,988 |
Other receivables | 6 | 11,545 |
| 14,273 |
Total current assets |
| 95,864 |
| 78,030 |
|
|
|
|
|
Property, plant and equipment, net of accumulated depreciation and amortization | 7 | 41,899 |
| 42,282 |
Total non-current assets |
| 41,899 |
| 42,282 |
Total assets |
| $137,763 |
| $120,312 |
Liabilities and Stockholders Equity/(Deficit) |
|
|
|
|
Liabilities |
|
|
|
|
Payroll taxes |
| $1,605 |
| $916 |
Accrued and other liabilities | 8 | 32,939 |
| 34,999 |
Borrowings | 9 | 133,143 |
| 129,591 |
Total current liabilities |
| 167,687 |
| 165,506 |
Total liabilities |
| 167,687 |
| 165,506 |
Equity |
|
|
|
|
Common stock, $0.000001 par value, 500,000,000 shares authorized and 246,016,947 shares issued and outstanding, respectively |
| 229 |
| 221 |
Additional paid in capital |
| 157,150 |
| 157,150 |
Other comprehensive earnings | 10 | 2,848 |
| 4,001 |
Accumulated losses |
| (190,151) |
| (206,566) |
Total stockholders equity/(deficit) |
| (29,924) |
| (45,194) |
Total liabilities and stockholders equity/(deficit) |
| $137,763 |
| $120,312 |
|
|
|
|
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
2
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Operations
For the three months ended September 30, 2016 and 2015
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
3
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
4
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1.1
Nature of Operations
During the period Arem Pacific Corporation (Delaware) has been focusing of its business to operation of Oriental holistic health centre located in Australia (Victoria) through Arem Pacific Corporation (Arizona) and its wholly owned subsidiary Sanyi Group Pty Ltd. Sanyi Group Pty Ltd operates one outlet in Australia.
Unless the context indicates otherwise, the term Group as used herein includes Arem Pacific Corporation (Delaware), Arem Pacific Corporation (Arizona) and Sanyi Group Pty Ltd.
1.2
Basis of Accounting
The accompanying financial statements include the accounts of Arem Pacific Corporation (Arizona) and its wholly owned subsidiary Sanyi Group Pty Ltd which is a company domiciled in Australia. These financial statements have been prepared in accordance with the accounting principles generally accepted in the United States (GAAP) and Regulation S-X published by the US Securities and Exchange Commission (the SEC). All intercompany accounts and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the current period presentation. Such reclassifications had no effect on the prior period net income, accumulated deficit, net assets, or total shareholders' deficit. The Company has evaluated events or transactions through the date of issuance of this report in conjunction with the preparation of these consolidated financial statements. All amounts presented are in US dollars, unless otherwise noted.
The financial statements, except for cash flow information, have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The amounts presented in the financial statements have been rounded to the nearest dollar.
1.3
Going Concern Basis
The financial statements have been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
At September 30, 2016 the Company had a current asset deficiency of $71,823 and net asset deficiency of $29,924 (June 30, 2016 current asset deficiency of $87,476 and net asset deficiency of $45,194). The Company reported an after tax income of $16,415 for the three months ended September 30, 2016 (September 30, 2015 income: $19,247).
Despite the current asset surplus, the Company has prepared the financial statements on a going concern basis that contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities at the amounts recorded in the financial statements in the ordinary course of business.
The Company believes that there are reasonable grounds to support the fact that it will be able to pay its debts as and when they become due and payable. In forming this opinion, the
5
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
Company has considered the following factors:
(i)
As at September 30, 2016, $133,143 of the borrowings was owed to Xin Jin, a significant shareholder and an officer of the Company and the Director of its wholly owned subsidiary Sanyi Group Pty Ltd.
(ii)
The Directors of the Company have received a Letter of Support from Xin Jin, in which he offers to provide continuing financial support to Sanyi Group Pty Ltd to enable it to meet its liabilities as and when they become due and payable for a period of not less than twelve months from the date of the financial statements. The loan of $133,143 as at September 30, 2016 to Sanyi Group Pty Ltd will not be called upon without giving at least 13 months notice.
(iii)
The Company has been able to generate positive cash flows from operating activities for the three months ended September 30, 2016.
If the Company is unable to continue as a going concern it may be required to realise its assets and extinguish its liabilities other than in the ordinary course of business at amounts different from those stated in the financial statements.
The financial statements do not include adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the company not continue as a going concern.
1.4
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
1.5
Foreign Currency Translation
The functional currency of our foreign subsidiary is its local currency. Assets and liabilities of the foreign subsidiary are translated into US dollars at period-end exchange rates, stockholders equity is translated at the historical rates and the consolidated statement of operations and cash flows are translated at average exchange rates during the reporting periods. Resulting translation adjustments are recorded in accumulated other comprehensive income, a separate component of stockholders equity. A component of accumulated other comprehensive income will be released into income when the Company executes a partial or complete sale of an investment in a foreign subsidiary or a group of assets of a foreign subsidiary considered a business and/or when the Company no longer holds a controlling financial interest in a foreign subsidiary or group of assets of a foreign subsidiary considered a business.
6
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
Transactions denominated in currencies other than the local currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in foreign currency transaction gains and losses that are reflected in results of operations as unrealized (based on period end translation) and realized (upon settlement of the transactions) and reported under other general expenses in the consolidated statement of operations.
1.6
Cash and Cash Equivalents and Concentration of Credit Risk
The Company considers all highly liquid short term investments with original maturities of three months or less at the date of acquisition to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short term nature of these instruments.
The Company's financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are held in several Australian bank accounts and time deposit accounts. The Company regularly assesses the level of credit risk we are exposed to and whether there are better ways of managing credit risk. The Company invests its cash and cash equivalents with reputable financial institutions. The Company has not incurred any losses related to these deposits.
1.7
Accounts Receivable
The collectability of accounts receivable is continuously monitored and analysed based upon historical experience. The use of judgment is required to establish a provision for allowance for doubtful accounts for specific customer collection issues identified. The allowance for doubtful accounts was $0 as of September 30, 2016 and June 30, 2016 respectively.
1.8
Property and Equipment
Property and equipment are recorded at cost. Costs of renewal and improvements that substantially extend the useful lives of assets are capitalised. Maintenance and repair costs are expensed when incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from two to ten years.
Derecognition
An item of plant and equipment is derecognised upon disposal or when no further economic benefits are expected from its use or disposal.
1.9
Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset but not the legal ownership are transferred to entities in the consolidated group, are classified as finance leases.
7
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses on a straight-line basis over the lease term.
1.10
Payables
Payables are carried at amortised cost and, due to their short-term nature, they are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial period that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.
1.11
Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.
1.12
Loans and Borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
The Companys current liabilities include a loan from a shareholder which are not interest bearing. The shareholder has agreed that the loan to the Company will not be recalled without giving at least 13 months notice from the date the Directors adopt the annual financial statements.
Loans are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
8
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
1.13
Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable after taking into account any discounts.
The Company derives revenue primarily through the provision of therapeutic health services from its Oriental Holistic Health Centres. Revenue is recognized when persuasive evidence of an arrangement exists, the services have been rendered to customers, the pricing is fixed or determinable and collection is reasonably assured. This is generally based on the completion of services provided to the customers at the Oriental Holistic Health Centres and settlement of the transactions either by cash or credit card payments.
Interest revenue is recognised using the effective interest method, which for floating rate financial assets is the rate inherent in the instrument. Dividend revenue is recognised when the right to receive a dividend has been established.
All revenue is stated net of the amount of goods and services tax.
1.14
Income Tax
Taxes payable is based on taxable profit for the period which excludes items of income or expense that are taxable or deductible in other periods. Taxable profit also excludes items that are never taxable or deductible. Companys liability for current tax is calculated using tax rates that have been enacted or substantively enacted as of the balance sheet date.
Deferred income tax expense is calculated using the liability method in accordance with ASC 740 Income Taxes. Deferred tax assets and liabilities are classified as non-current in the balance sheet and are measured based on the difference between the carrying value of assets and liabilities for financial reporting and their tax basis when such differences are considered temporary in nature. Temporary differences related to intercompany profits are deferred using the buyers tax rate. Deferred tax assets are reviewed for recoverability every balance sheet date, and the amount probable of recovery is recognised.
Deferred income tax expense represents the change in deferred tax asset and liability balances during the period except for the deferred tax related to items recognised in other comprehensive income or resulting from a business combination or disposal. Changes resulting from amendments and revisions in tax laws and tax rates are recognised when the new tax laws or rates become effective or are substantively enacted. Uncertain tax positions are recognised in the financial statements based on managements expectations.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, when they related to income taxes levied by the same taxation authority, and when the Group intends to settle its current tax assets and liabilities on a net basis.
9
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
Deferred taxes are not provided on undistributed earnings of subsidiaries when the timing of the reversal of this temporary difference is controlled by Company and is not expected to happen in the foreseeable future. This is applicable for the majority of Companys subsidiaries.
1.15
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from or payable to the ATO, are presented as operating cash flows included in receipts from customers or payments to suppliers.
1.16
Earnings (Loss) per Common Share
Basic earnings (loss) per common share is computed by dividing income or losses available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is computed similar to basic net income or losses per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and of the additional common shares were dilutive. Diluted earnings (loss) per common share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and the if-converted method for the outstanding convertible preferred shares. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under if converted method, convertible outstanding instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).
1.17
Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) is presented net of applicable income taxes in the accompanying consolidated statements of stockholders' equity and comprehensive income (loss). Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under GAAP are reported as separate components of stockholders' equity instead of net income (loss).
1.18
Recently Issued Accounting Standards
In May 2014, the FASB issued ASU 2014-09, which establishes a comprehensive new revenue recognition standard designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In doing so, companies may need to use more judgment and make more estimates
10
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
than under current revenue recognition guidance. The ASU allows for the use of either the full or modified retrospective transition method, and the standard will be effective for us in the first quarter of our fiscal year 2018; early adoption is not permitted. The Company is currently evaluating which transition approach to use and the impact of the adoption of this standard on its consolidated financial statements.
In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires that deferred tax assets and liabilities be classified as non-current in a classified balance sheet. This update is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2016. The standard permits the use of either the retrospective or prospective transition method. The adoption of this standard is expected to result in a reclassification between current and non-current deferred tax assets within the Companys consolidated balance sheets and related disclosures.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842). This update requires organizations that lease assets with lease terms of more than 12 months to recognize assets and liabilities for the rights and obligations created by those leases on their balance sheets. It also requires new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect that the updated standard will have on its consolidated balance sheets and related disclosures.
In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). This update amends the principal-versus-agent implementation guidance and illustrations in the Boards new revenue standard (ASC 606). The FASB issued the ASU in response to concerns identified by stakeholders, including those related to (1) determining the appropriate unit of account under the revenue standards principal-versus-agent guidance and (2) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standards control principle. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the effect that the updated standard will have on our financial statements.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The Company is currently evaluating the effect that the updated standard will have on our financial statements.
In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. This update clarifies how an entity identifies performance obligations related to customer contracts as well as help to improve the operability and understanding of the licensing implementation guidance. The amendments in this
11
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
update affect the guidance in Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective but will become effective for annual and interim periods beginning after December 15, 2017. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements and related disclosures.
In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. This update clarifies the objectives of collectability, sales and other taxes, noncash consideration, contract modifications at transition, completed contracts at transition and technical correction. The amendments in this update affect the guidance in Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective but will become effective for annual and interim periods beginning after December 15, 2017. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the effect that the updated standard will have on our financial statements.
In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the effect that the updated standard will have on our financial statements.
There are no new significant accounting standards applicable to the Company that have been issued but not yet adopted by the Company as of September 30, 2016.
12
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
2.
Critical Accounting Estimates and Judgements
The Directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Company.
Key Estimates
(i)
Useful lives
The Company determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
(ii)
Income tax
The Company is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognises liabilities for anticipated tax audit issues based on the Company's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
(iii)
Fair value measure of shares issued
The calculation of the fair value of shares issued requires significant estimate to be made in regards to several variables. The estimations made are subject to variability that may alter the overall fair value determined.
Key Judgements
(i)
Provision for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and specific knowledge of the individual debtors financial position.
13
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
(ii)
Impairment
The Company assessed that no indicators of impairment existed at the reporting date and as such no impairment testing was performed.
3.
Segment Information
The consolidated entity operates predominantly in one industry and one geographical segment, those being oriental holistic health services and Australia, respectively.
4.
Cash and Cash Equivalents
Cash at the end of the financial periods as shown in the statement of cash flows is reconciled to items in the balance sheets as follows:
| September 30, 2016 | June 30, 2016 |
|
|
|
Cash at bank | $57,182 | $38,000 |
Petty Cash | 2,489 | 1,769 |
| $59,671 | $39,769 |
5.
Other Assets
| September 30, 2016 | June 30, 2016 |
Current |
|
|
Deposits paid | $24,648 | $23,988 |
6.
Other Receivables
| September 30, 2016 | June 30, 2016 |
Current |
|
|
Prepayment | $11,445 | $11,139 |
Refundable from the Australian Taxation Office | 100 | 3,134 |
| $11,545 | $14,273 |
14
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
7.
Property, Plant and Equipment
| Furniture and fittings | Office equipment | Computers | Motor vehicles | Plant and equipment | Lease Improvements | Total |
At cost |
|
|
|
|
|
|
|
Balance at July 1, 2016 | $2,349 | $654 | $10,201 | - | $14,620 | $80,772 | $108,596 |
Additions | - | - | - | - | - | - | - |
Disposals | - | - | - | - | - | - | - |
Effect of foreign currency exchange difference | 64 | 18 | 280 |
| 401 | 2,219 | 2,982 |
Balance at September 30, 2016 | 2,413 | 672 | 10,481 | - | 15,021 | 82,991 | 111,578 |
|
|
|
|
|
|
|
|
Accumulated depreciation and amortization |
|
|
|
|
|
|
|
Balance at July 1, 2016 | (1,598) | (649) | (7,968) | - | (11,171) | (44,928) | (66,314) |
Depreciation expense | (24) | (1) | (285) | - | (193) | (1,032) | (1,535) |
Disposals | - | - | - | - | - | - | - |
Effect of foreign currency exchange difference | (44) | (17) | (221) |
| (277) | (1,271) | (1,830) |
Balance at September 30, 2016 | ($1,666) | ($667) | ($8,474) | - | ($11,641) | ($47,231) | ($69,679) |
|
|
|
|
|
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Net book value |
|
|
|
|
|
|
|
As at June 30, 2016 | $751 | $5 | $2,233 | - | $3,449 | $35,844 | $42,282 |
As at September 30, 2016 | $747 | $5 | $2,007 | - | $3,380 | $35,760 | $41,899 |
8.
Accrued and Other Liabilities
| September 30, 2016 | June 30, 2016 |
Current |
|
|
Payroll liabilities | $5,595 | $8,386 |
Other payables | 27,344 | 26,613 |
| $32,939 | $34,999 |
9.
Borrowings
| September 30, 2016 | June 30, 2016 |
Current |
|
|
Loan from related party | $133,143 | $129,591 |
AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
Included in the loan balance above is an unsecured loan from Xin Jin, a significant shareholder and an officer of the Company and the Director of its wholly owned subsidiary Sanyi Group Pty Ltd. The loan bears nil interest per annum.
10.
Other Comprehensive Earnings
| September 30, 2016 | June 30, 2016 |
Foreign currency translation reserve | $2,848 | $4,001 |
11.
Income Tax Expense
| 2016 | 2015 |
(a) The components of tax (expense)/income comprise: |
|
|
Current tax |
|
|
- Australia | - | - |
- US | - | - |
Total | - | - |
|
|
|
Deferred tax |
|
|
- Australia | - | - |
- US | - | - |
Total | - | - |
|
|
|
(b) The prima facie tax on profit from ordinary activities before income tax is reconciled to income tax as follows: |
|
|
|
|
|
Profit from continuing operations before income tax expense: |
|
|
- Australia | $16,415 | $19,247 |
- US | - | - |
Total | $16,415 | $19,247 |
|
|
|
Income tax expense at statutory rate: |
|
|
- Australia | $4,924 | $5,774 |
- US | - | - |
Total | $4,924 | $5,774 |
|
|
|
Tax expense reconciliation: |
|
|
Tax losses not recognised as deferred tax assets | - | - |
Recoupment of prior years losses | (4,924) | (5,774) |
Consolidated income tax expense | - | - |
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AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
12.
Capital and Leasing Commitments
There was no capital expenditure at September 30, 2016.
The following table summarizes the Companys future minimum leasing commitments under non-cancellable operating leases at September 30, 2016:
| Total |
Amounts payable in fiscal year |
|
2017 | 43,059 |
2018 | 59,881 |
2019 | 62,875 |
2020 | 8,869 |
| $174,684 |
|
|
13.
Contingencies
From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a material adverse effect on the Companys financial position.
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AREM PACIFIC CORPORATION
Condensed Consolidated Statement of Cash Flows
For the three months ended September 30, 2016 and 2015
14.
Related Party Transactions
(a)
Parent entity
The ultimate parent entity which exercises control over the Group is Arem Pacific Corporation.
(b)
Subsidiary
Upon closing of the reverse acquisition on August 8, 2013, Arem Pacific Corporation (Arizona) became a wholly owned subsidiary of Arem Pacific Corporation (a Delaware company, formerly Diversified Mortgage Workout Corporation).
Sanyi Group Pty Ltd is a wholly owned subsidiary of Arem Pacific Corporation (Arizona) which is incorporated in Australia.
(c)
Outstanding balances with related parties
The following balances are outstanding at reporting date in relation to transactions with related parties:
| September 30, 2016 | June 30, 2016 |
Loan from related party | $133,143 | $129,591 |
Included in the loan balance above is an unsecured loan from Xin Jin, a significant shareholder and an officer of the Company and the Director of its wholly owned subsidiary Sanyi Group Pty Ltd.
15.
Events After the Reporting Period
There has not arisen in the interval between the end of the financial period and the date of these financial statements any other item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operation of the Company, the results of those operations, or the state of affairs of the Company, in future financial years.
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ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENT NOTICE
General.
The following discussion and analysis of the results of operations and financial condition of the Company for Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015, respectively, should be read in conjunction with the notes to the financial statements that are included elsewhere herein. The consolidated financial statements presented herein (and to which this discussion relates) reflect the results of operations of Arem Pacific-Delaware, and its subsidiaries, Arem Pacific-Arizona. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as anticipate, estimate, plan, project, continuing, ongoing, expect, believe, intend, may, will, should, could, and similar expressions to identify forward-looking statements. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
COMPANY OVERVIEW
We were incorporated in the State of Delaware on November 8, 2007 under the name of Aspen Global Corp. On June 10, 2008, we changed our name to Diversified Mortgage Workout Corp. On June 19, 2013, Arem Pacific Corporation, an Arizona corporation (Arem Pacific-Arizona), acquired voting control of the Company (then Diversified Workout Corporation). Subsequently, on August 8, 2013, we acquired all of the issued and outstanding shares of Arem Pacific-Arizona, from its then existing shareholders. In connection with that transaction, we retired and returned to our treasury all of the capital stock acquired by Arem Pacific-Arizona in the July 19, 2013 transaction and we also changed our name in Delaware to Arem Pacific Corp. On July 23, 2013, we effected a 388 for 1 reverse split of our outstanding common stock. Arem Pacific-Arizona, our wholly owned subsidiary, was incorporated on July 11, 2007.
In addition, on June 30, 2012, pursuant to an Acquisition Agreement with Sanyi Pty Ltd, an Australian company, Arem-Arizona acquired all of the equity interest in that company. In exchange, the sole owner of Sanyi Pty Ltd, Mr. Xin Jin, received 10,000,000 shares of our common stock. The shares were issued on August 30, 2013. We operate two wellness centers in Victoria State, Australia. At our centers, we provide a range of services, including acupressure/reflexology, massage and cupping. One of the centers is located in Chirnside Park Shopping Centre, Chirnside Park (a suburb of Victoria), Australia VIC 3116, and the second is located in Point Cook Shopping Centre, 2 Main St, Point Cook, Victoria, Australia VIC 3030. On April 1_, 2016, the Company closed its Chirnside Park location due to a significant increased in rent by the landlord.
On September 23, 2015 the Company filed a Form S-1 Registration Statement with the Securities and Exchange Commission (Commission) pursuant to which it registered 13,694,711 shares of its outstanding common stock. The registration statement was declared effective on by the Commission on April 15, 2016.
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Our financial statements are prepared in US Dollars and in accordance with accounting principles generally accepted in the United States. See " Foreign Currency Translation" below for information concerning the exchange rates at the Australian Dollar ("AUD") translated into US Dollars ("USD") at various pertinent dates and for pertinent periods.
Results of Operations (Unaudited) for the Three months Ended September 30, 2016 Compared to Three months Ended September 30, 2015.
Revenues
Revenues for three month period ended September 30, 2016 was $65,275 compared with $97,339 for the comparable period in 2015. The decrease of $32,064 or 33% for current period is due to the closing of the Chirnside Park location which occurred on April 1, 2016 and the reduction of revenue at our Point Cook location due to the opening of a new competitor near our Point Cook location .
Operating Expenses
Payroll and related expenses for the current three month period was $49,051 compared with $78,165 for the prior three month period. The decrease of $29,114 or 37% from the prior period is due to lower headcount for the current period.
Occupancy expense was $26,558 for the current three month period compared with $43,891 for the prior three month period. The decrease for current period is due to the closing of the Chirnside Park location.
Income (Loss) from Continuing Operations
Income from continuing operations for the current three month period is $16,415 compared with a gain of $19,247 due to reasons discussed above. No income tax was paid for either period.
Other Comprehensive Income
Foreign currency exchange adjustment was $(1,153) for the current three month period compared with $9,829 for the prior three month period. This adjustment is a result of unrealized profit or loss on conversion to U.S. dollars of assets and liabilities that are accounted for in Australian Dollars.
Total Comprehensive Income
Total Comprehensive Income for the current three month period is $15,262 compared with a Total Comprehensive Income of $29,076 due to reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2016, we had working capital deficit of $71,823 compared with a working capital deficit of $87,476 for June 30, 2016. The improvement in working capital is a result an increase of cash and equivalents on hand.
Our primary uses of cash have been for operations. The main sources of cash have been from operational revenues. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:
·
Addition of administrative and marketing personnel as the business grows,
·
Development of a Company website,
·
Increases in advertising and marketing in order to attempt to generate more revenues, and
·
The cost of being a public company.
The Company believes that cash flow from operations together with the financial support that it has received from Mr. Xin Jin will be sufficient to sustain its current level of operations for at least the next 12 months of operations. Mr. Xin Jin, is a significant shareholder and an officer of the Company, has provided a Letter of Support to the Company pursuant to which he has agreed that during the period from June 30, 2015 through
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July 31, 2016, he will provide financial support to the Company to enable it to meet its liabilities as the come due and agreed not to demand repayment of an outstanding loan due to him without 13 months prior notice. The loan is not evidenced by a promissory note, bears no interest and is not subject to any specific terms, other than as provided in the preceding sentence. There has been no movement in the loan during the three month period ended September 30, 2016. The movement in the balance represents the foreign exchange translation.
Summary of Significant Accounting Policies
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Companys fiscal year-end is June 30.
Use of Estimates and Assumptions
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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Foreign Currency Translation
The functional currency of our foreign subsidiary is its local currency. Assets and liabilities of the foreign subsidiary are translated into US dollars at period-end exchange rates, stockholders equity is translated at the historical rates and the consolidated statement of operations and cash flows are translated at average exchange rates during the reporting periods. Resulting translation adjustments are recorded in accumulated other comprehensive income, a separate component of stockholders equity. A component of accumulated other comprehensive income will be released into income when the Company executes a partial or complete sale of an investment in a foreign subsidiary or a group of assets of a foreign subsidiary considered a business and/or when the Company no longer holds a controlling financial interest in a foreign subsidiary or group of assets of a foreign subsidiary considered a business.
Transactions denominated in currencies other than the local currency are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in foreign currency transaction gains and losses that are reflected in results of operations as unrealized (based on period end translation) and realized (upon settlement of the transactions) and reported under other general expenses in the consolidated statement of operations.
Fair Value of Financial Instrument
The Company's financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents are held in several Australian bank accounts and time deposit accounts. The Company regularly assesses the level of credit risk we are exposed to and whether there are better ways of managing credit risk. The Company invests its cash and cash equivalents with reputable financial institutions. The Company has not incurred any losses related to these deposits.
Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740-10-50 Accounting for Income Taxes as of its inception. Pursuant to the standard, the Company is required to compute tax asset benefits for initial years of operating losses carried forward.
Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with ASC 260-10-4-5, Earnings per Share. The standard requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible preferred stock, using the if-converted method. In
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computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.
Recent Accounting Pronouncements
In February 2013, the FASB issued Accounting Standards Update ("ASU") No. 2013-02 which requires additional disclosures regarding the reporting of reclassifications out of accumulated other comprehensive income. ASU No. 2013-02 requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. This guidance is effective for reporting periods beginning after December 15, 2012. The Company adopted this guidance effective July 1, 2013. The Company's adoption of this standard did not have a significant impact on its consolidated financial statements.
In March 2013, the FASB issued ASU No. 2013-05, which permits an entity to release cumulative translation adjustments into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of a foreign subsidiary or foreign group of assets comprising a business. The Company's adoption of this standard did not have a significant impact on its consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, which establishes a comprehensive new revenue recognition standard designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In doing so, companies may need to use more judgment and make more estimates than under current revenue recognition guidance. The ASU allows for the use of either the full or modified retrospective transition method, and the standard will be effective for us in the first quarter of our fiscal year 2018; early adoption is not permitted. The Company is currently evaluating which transition approach to use and the impact of the adoption of this standard on its consolidated financial statements.
There are no new significant accounting standards applicable to the Company that have been issued but not yet adopted by the Company as of June 30, 2015.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
ITEM 4.
CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commissions 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 issuers management, including its principal executive
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officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2016. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Management also confirmed that there was no change in our internal control over financial reporting during the three-month period ended September 30, 2016 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
We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A.
RISK FACTORS
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
No unregistered equity securities were sold during the three and six months ended September 30, 2016.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
No senior securities were issued or outstanding during the three and six months ended September 30, 2016 or 2015.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable to our Company.
ITEM 5.
OTHER INFORMATION
None
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ITEM 6.
EXHIBITS
The following exhibits are included as part of this report by reference:
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
| XBRL Instance Document |
101.SCH |
| XBRL Taxonomy Extension Schema Document |
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
101.INS |
| XBRL Instance Document |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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