UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 8-K/A

(Amendment No. 1)

______________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 16, 2016

______________

CHINA GEWANG BIOTECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

______________


Nevada

0-54451

42-1769584

(State or Other Jurisdiction

(Commission

(I.R.S. Employer

of Incorporation)

File Number)

Identification No.)


Xita 23C, Star International, No. 8 Jinsui Road, Pearl River New Town,

 Guangzhou Province, P.R. China 510623

(Address of Principal Executive Office) (Zip Code)


86-024-2397-4663

(Registrant’s telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





1





Amendment No. 1


This amendment is being filed in order to:


·

correct the description of the acquisition transaction; and

·

file the financial statements of Tianmei Beverage Group Corporation Limited

Item 2.01

Completion of Acquisition of Assets


On April 28, 2016, the Registrant's wholly-owned subsidiary, Biotechnology International Holding Ltd. (“Biotechnology”), entered into an investment agreement with Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd. (“Guangdong Tianmei”).  Guangdong Tianmei was organized in May 2015, and is engaged in the business of distributing selenium-rich bottled water in the PRC. Guangdong Tianmei also functions as a placement agent for a variety of products from various vendors, all within the PRC. The investment agreement provided that Biotechnology would pay US$1,000,000 to acquire a 30% interest in Tianmei Beverage Group Corporation Limited (“Tianmei Australia”), an Australian corporation, which would indirectly own all of the equity in Guangdong Tianmei.


The acquisition by Biotechnology of 30% of Tianmei Australia, was completed in May 2016, at which time it acquired ownerships of Guangdong Tianmei.  The payment of the $1,000,000 purchase price was made on June 17, 2016.  


Item 9.01

Financial Statements and Exhibits


Financial Statements


Financial statements of Tianmei Beverage Group Corporation Limited and Subsidiaries for the six months ended 31 May 2016.

Financial statements of Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd. for the period from 22 May 2015 (inception) to 30 November 2015.  

Pro forma condensed consolidated financial information of China Gewang Biotechnology, Inc.





2




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, hereunto duly authorized.


         

China Gewang Biotechnology, Inc.

 

 

  

Date:  December 5, 2016

By:  

/s/ Li Wang

Li Wang, Chief Executive Officer




3





FINANCIAL STATEMENTS

Tianmei Beverage Group Corporation Limited and Subsidiaries

 

Independent Auditors' Report.............................................................................................

F-1

Consolidated Statement of Financial Position as at 31 May 2016.....................................

F-2

Consolidated Statement of Profit or Loss and Other Comprehensive Income (Loss)

     for the Six Months Ended 31 May 2016.......................................................................

F-4

Consolidated Statement of Changes in Equity for the Six Months Ended 31 May 2015..

F-5

Consolidated Statement of Cash Flows……………………………................................................................................

F-6

Notes to the Consolidated Financial Statements................................................................

F-8

Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd.

 

Report of Independent Auditors………………………….................................................

F-36

Statement of Profit or Loss and Other Comprehensive Income (Loss)

for the Period from 22 May 2015 (Inception) to 30 November 2015................................

F-37

Statement of Financial Position..........................................................................................

F-38

Statement of Changes in Equity for the Period from 22 May 2015 (Inception)

      to 30 November 2015...................................................................................................

F-40

Statement of Cash Flows Period from 22 May 2015 (Inception) to 30 November 2015..

F-41

Notes to Financial Statements............................................................................................

F-42

China Gewang Biotechnology, Inc.

 

Unaudited Pro Forma Condensed Consolidated Financial Information............................

F-63




4




INDEPENDENT AUDITORS’ REPORT


Shareholders and Board of Directors

Tianmei Beverage Group Corporation Limited


Report on the Consolidated Financial Statements


We have audited the accompanying consolidated financial statements of Tianmei Beverage Group Corporation Limited and Subsidiaries, which comprise the consolidated statement of financial position as at 31 May 2016, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the six months ended 31 May 2016, and a summary of significant accounting policies and other explanatory information.


Management’s Responsibility for the Consolidated Financial Statements


Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.


Auditors’ Responsibility


Our responsibility is to express an opinion on these consolidated financial statements based on our audit.  We conducted our audit in accordance with International Standards on Auditing.  Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.


An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.  The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


Opinion


In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of Tianmei Beverage Group Corporation Limited and Subsidiaries as at 31 May 2016, and of its consolidated financial performance and its cash flows for the six months ended 31 May 2016 in accordance with International Financial Reporting Standards.


/s/ Wei, Wei & Co. LLP


Liren Wei

Managing Partner


12 November 2016

New York, United States of America




F-1





TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MAY 2016

IN US DOLLARS

 

 

ASSETS

Notes

 

 

 

 

Non-current assets

 

 

Property and equipment, net

9

482,190

Prepayments

8

388,660

  Non-current assets

 

870,850

 

 

 

Current assets

 

 

Deposit

7

151,895

Inventories

3.2

314,576

Deferred offering costs

3.5

336,694

Deferred slotting fees

3.5

2,395,333

Prepayments

8

684,099

Trade and other receivables

5.1.1

1,291

Cash and cash equivalents

3.1.1

12,015,425

  Current assets

 

15,899,313

 

 

 

TOTAL ASSETS

 

16,770,163



F-2




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

AS AT 31 MAY 2016

IN US DOLLARS

 

 

EQUITY AND LIABILITIES

Notes

 

 

 

 

Equity

 

 

Share capital

13

9,801,422 

Receivable for equity share

13

(1,000,000)

Statutory reserve fund

3.6

445,430 

Retained earnings

 

4,006,484 

Other comprehensive (loss)

 

(239,471)

  Total equity

 

13,013,865 

 

 

 

Current liabilities

 

 

Trade and other payables

10

819,752 

Advance from customers

10

778,234 

Taxes payable

3.8

1,066,132 

Convertible debt payable

12

1,002,507 

Borrowings - third parties

11

89,673 

  Current liabilities

 

3,756,298 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

16,770,163 




F-3




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (LOSS)

FOR THE SIX MONTHS ENDED 31 MAY 2016

IN US DOLLARS

 

 

 

 

Notes

 

 

 

 

Revenue

3.7

10,869,660 

Cost of sales

17

(4,168,888)

  Gross profit

 

6,700,772 

 

 

 

Other income

 

767,622 

Selling and distribution expenses

18.1

(934,898)

Administrative expenses

18.2

(1,970,202)

Financing expenses

18.3

(9,476)

Research and development expenses

18.4

(390,327)

  Operating profit before income tax expense

 

4,163,491 

 

 

 

Income tax expense

6

(1,482,333)

  Profit for the period

 

2,681,158 

 

 

 

Other comprehensive (loss):

 

 

Exchange differences on translating foreign currencies

2.6

(206,063)

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

 

2,475,095 




F-4




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31 MAY 2016

 

 

 

 

 

 

 

 

 

IN US DOLLARS


 

 

 Receivable

 

  Statutory

 

 

 

 Other

 

 

 

 Share  

 For equity

 

  Reserve  

 

 Retained  

 

 Comprehensive

 

 Total

 

 Capital

 Share

 

 Fund

 

 Earnings

 

 Income (loss)

 

Equity

 

 

 

 

 

 

 

 

 

 

 

Balance - as at 30 November 2015

-

(1,000,000)

 

177,241

 

1,593,515 

 

(33,408)

 

737,348 

Share capital

8,034,304

 

-

 

 

 

8,034,304 

Issue of ordinary shares for compensation

1,767,118

 

-

 

 

 

1,767,118 

Profit for the year

-

 

-

 

2,681,158 

 

 

2,681,158 

Statutory reserve

-

 

268,189

 

(268,189)

 

 

Other comprehensive (loss)

-

 

-

 

 

(206,063)

 

(206,063)

Balance - as at 31 May 2016

9,801,422

(1,000,000)

 

445,430

 

4,006,484 

 

(239,471)

 

13,013,865 




F-5





TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS                  

FOR THE SIX MONTHS ENDED 31 MAY 2016

IN US DOLLARS

 

 

 

 

Notes

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

Profit for the period

 

2,681,158 

Adjustments to reconcile profit after tax to net cash flows:

 

 

 

Depreciation

9.3

57,167 

 

Share compensation for management

 

1,767,118 

 

Interest expense

 

9,477 

 

Income tax expense

6

1,482,333 

Working capital adjustments:

 

 

 

Change in inventories

17.1

(314,576)

 

Change in deferred offering costs

3.5

(312,948)

 

Change in deferred slotting fees

3.5

(1,091,432)

 

Change in trade and other receivables

5.1.1

520 

 

Change in prepayments

8

(1,072,759)

 

Change in trade and other payables

10

590,231 

 

Change in advance from customers

10

653,008 

Cash generated from operating activities

 

4,449,297 

Interest paid

 

(12,796)

Income taxes paid

 

(838,687)

Net cash provided by operating activities

 

3,597,814 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

Interest received

 

3,319 

Purchase of property and equipment

9.2

(296,155)

Deposit payment for intent of acquisition

7

(153,514)

Net cash (used in) investing activities

 

(446,350)



F-6





TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)             

FOR THE SIX MONTHS ENDED 31 MAY 2016

IN US DOLLARS

 

 

 

 

Notes

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

Proceeds from issuance of convertible debt

12

1,013,192 

Proceeds from borrowings – third parties

11

78,011 

Proceeds from capital contribution

13

7,034,304 

Repayment of borrowings – Guangdong Tianmei former shareholder

11

(614,056)

Net cash provided by financing activities

 

7,511,451 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

10,662,915 

Cash and cash equivalents - beginning

 

1,418,052 

Effect of exchange rate fluctuations on cash and cash equivalents

 

(65,542)

CASH AND CASH EQUIVALENTS - ENDING

 

12,015,425 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

NONCASH OPERATING ACTIVITIES :

 

 

Payable for deferred offering costs

 

11,873 

Payment of deferred offering costs by third party

 

11,873 

 

 

 

 

 

 

NONCASH FINANCING ACTIVITIES :

 

 

Receivable for equity share

 

1,000,000 



F-7




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1.

CORPORATE INFORMATION


Tianmei Beverage Group Corporation Limited (“the Company”) is an entity registered under the Australian Corporations Act 2001 on 6 May 2016, which is contemplating becoming a public company in Australia through the filing of a registration statement with the Australian Securities & Investments Commission (“ASIC”).  Tianmei International Beverage Co., Ltd. (“Tianmei International”) was incorporated in British Virgin Islands on 9 November 2015, and Mr. Xiaoran Zhang was the sole shareholder and director.  Tianmei International is authorized to issue 50,000 shares at USD 1.00 each.  On 16 May 2016, Mr. Xiaoran Zhang transferred his 50,000 shares of Tianmei International to the Company in consideration of USD 50,000.  On the same day, Ms. Li Wang was appointed as Director of Tianmei International replacing Mr. Zhang.  


On 7 April 2016, Tianmei International purchased all of the shareholding of Hong Kong Tianmei International Holding Co., Ltd. (“Tianmei HK”), which was incorporated on 16 September 2014 by Ms. Gao Yisha Yang, for HKD 10,000.  Tianmei HK incorporated Shenzhen Tianmei Selenium-Rich Information Consulting Co., Ltd. (“WFOE”) on 15 December 2015 with the registered capital of RMB 500,000.


Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd. (“Guangdong Tianmei”) is the operating entity, which was founded on 22 May 2015 in Guangdong Province in the People’s Republic of China (“PRC”).  Before 2 March 2016, Guangdong Tianmei was owned by four persons: Mr. Shili Zhang owned 44.94%, Ms. Xiaoqin Zheng owned 6%, Ms. Han Xu owned 44.06%, and Mr. Zuliang Xu owned 5%.  On 2 March 2016, the Guangdong Tianmei’s four shareholders transferred 100% ownership of Guangdong Tianmei to WFOE. On 21 April 2016, the transfer was approved by the Chinese local government.


As a result of series of the transaction among parties mentioned above, the Company owns 100% of Tianmei International, Tianmei International owns 100% of Tianmei HK, Tianmei HK owns 100% of WFOE, and WFOE owns 100% of Guandong Tianmei.



F-8




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1.

CORPORATE INFORMATION (continued)


The Company has a corporate structure as follows:

[form8k51616tianmeiamno1002.gif]


On April 28, 2016, Biotechnology International Holding Ltd. (“Biotechnology International”), entered into an investment agreement with Guangdong Tianmei.  The investment agreement provided that Biotechnology International would pay $1,000,000 to acquire a 30% interest of the Company.  The acquisition by Biotechnology International of 30% of the Company was completed in May 2016.  The receivable for equity share of $1,000,000 was presented as an offset to equity in the consolidated statement of financial position as at 31 May 2016.  The investment agreement provided that payment of the $1,000,000 purchase price was due on June 20, 2016.  Payment in full was received on June 17, 2016.




F-9




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1.

CORPORATE INFORMATION (continued)


As at 31 May 2016, the Company was owned by the following shareholders: Biotechnology International owned 30%, Ms. Han Xu owned 30%, Ms. Mengdi Zhang owned 20%, and other shareholders owned 20%.


The Company’s business, through its operating entity in China (Guangdong Tianmei), is comprised of the following:


Sale of Selenium-Rich Water


The Company has an annual contract with a water company to bottle, under the Company’s label, water from a spring in the PRC that is rich in the mineral selenium.  Selenium is believed to have antioxidant properties and play a key role in the human body’s metabolism.  The bottled water is purchased by the Company from the supplier and is delivered directly to stores based upon monthly orders placed by each store.  Accordingly, the Company does not have any inventory of selenium-rich water as at 31 May 2016.  Revenue generated from the sale of selenium-rich water was $3,786,392 for the six months ended 31 May 2016.


Product Promotion and Placement Service


The Company has annual agreements with various vendors to assist them in the placement and marketing of their products.  The Company receives a monthly fee from the vendors based upon the number of items being placed in each store.  The Company has the ability to place these products based upon their relationships with over 900 stores in Guangdong Province.  In connection with these placement services, the Company enters into annual contracts with each store and must prepay the store an annual “slotting fee” charged for each product placed.  The Company has no responsibility regarding the vendors’ sales performance.  Revenue generated from the product promotion and placement service was $6,354,485 for the six months ended 31 May 2016.


Sale of Selenium-Rich Water Related Products


Starting in April 2016, the Company has expanded its product line and contracted a local supplier to manufacture a series of patented selenium-rich water related products including a variety of drinking water stands, an all-house water purifier and a beauty sprayer.  The products are purchased by the Company from the supplier and sold to the stores based upon orders placed by each store.  The Company has inventories of selenium-rich water related products of USD 314,576 as at 31 May 2016.  Revenue generated from the sale of selenium-rich water related products was $728,783 for the six months ended 31 May 2016.



F-10




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


2.

BASIS OF PREPARATION


2.1 Statement of compliance


The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).    


The consolidated financial statements were authorized for issue by the Board of Directors on 12 November 2016.


2.2 Basis of measurement


The consolidated financial statements have been prepared on a historical cost basis except for assets and liabilities required to be measured at fair value (See Note 4).


2.3 Subsidiaries


Subsidiaries are those entities over which the Company has control.  The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.  Subsidiaries are fully consolidated from the date on which control is transferred to the Company and are no longer consolidated from the date that control ceases.  All intercompany transactions, balances and unrealized gains or losses on transactions between Group companies are eliminated.


The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company as at 31 May 2016 and the results of these subsidiaries for the six months ended 31 May 2016.


2.4 Common control transactions  


The predecessor values method is used to account for the acquisition of subsidiaries by the Company under common control.  The predecessor values method requires financial statements to be prepared using predecessor book values without any step up to fair value.  The difference between any consideration given and the aggregate book value of the assets and liabilities (as of the date of the transaction) of the acquired entity are recorded as an adjustment to equity as a common control reserve.  No additional goodwill is created by the transaction.  Based upon this treatment, the effect of transaction has been recast as if this transaction had occurred at the beginning of the earliest period being presented accordingly.




F-11




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


2.

BASIS OF PREPARATION (continued)


2.5 Functional and presentation currency


These consolidated financial statements are presented in US dollars, and the Company’s functional currency is the Renminbi (“RMB”).  All financial information presented has been rounded to the nearest US dollar.


2.6 Foreign currency translation


Almost all Company assets are located in the PRC.  The functional currency for the Company’s operations is the Renminbi (“RMB”).  The Company uses the United States Dollar (“US Dollar” or “US$” or “$”) for financial reporting purposes.  


For the purpose of presenting the financial statements, the assets and liabilities of the Company are translated into US Dollar using the exchange rate prevailing at the end of reporting period.  Income and expense items are translated at the average exchange rate for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used.  Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity.  For the six months ended 31 May 2016, exchange differences on translating RMB to US Dollar of $(206,063) are recognized as other comprehensive loss in the consolidated statement of profit or loss and other comprehensive income (loss).  


Although government regulations now allow convertibility of the RMB for current account transactions, significant restrictions still remain.  Hence, such translations should not be construed as representations that the RMB could be converted into US Dollar at that rate or any other rate.


The value of the RMB against the US Dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the RMB may materially affect the Company’s financial condition in terms of US Dollar reporting.




F-12




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


2.

BASIS OF PREPARATION (continued)


2.7 Use of estimates and judgments


The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.  Actual results may differ from these estimates.


Estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


3.1 Financial instruments


3.1.1

Non-derivative financial assets

The Company initially recognizes trade and other receivables on the date that they are originated.  All other financial assets (including assets designated at fair value through profit or loss) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.  The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.  Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability.


Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.


The Company has the following non-derivative financial assets:




F-13




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.1 Financial instruments (continued)


Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  Such assets are recognized initially at fair value plus any directly attributable transaction costs.  Subsequent to initial recognition, non-current trade and other receivables are measured at amortized cost using the effective interest method, less any impairment losses.


Cash and cash equivalents

Cash and cash equivalents are comprised of cash balances, money market funds and short-term investments with original maturities of three months or less.


3.1.2

Non-derivative financial liabilities

The Company recognizes liabilities on the date at which the Company becomes a party to the contractual provisions of the instrument.  The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.  Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.


The Company has the following non-derivative financial liabilities: trade and other payables, advances from customers, taxes payable, and borrowings.  Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs.  Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.


3.1.3

Share capital

Ordinary shares are classified as equity.  Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.




F-14




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.2 Inventories


Inventories are stated at the lower of cost or net realizable value.  Cost is determined on a weighted average basis and comprises all costs of purchasing raw materials, direct labor and other costs.


Net realizable value is the estimated selling price in the ordinary course of business, less estimates of costs of completion and selling expenses.


When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related turnover is recognized.  The amount of any write-down of inventories to net realizable values and all losses of inventories are recognized as an expense in the period the write down or loss occurs.  The amount of any reversal of any write-down of inventories is recognized as a reduction in the amount of inventories as an expense in the period in which the reversal occurs.


3.3 Property and equipment


3.3.1

Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.  Cost includes expenditures that are directly attributable to the acquisition of the asset.  When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.  Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and are recognized net within other income (loss) in the statement of profit or loss and other comprehensive income (loss).



F-15




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.3 Property and equipment (continued)


3.3.2

Subsequent costs

The cost of replacing a part of an item of property and equipment is recognized at the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably.  The carrying amount of the replaced part is derecognized.  The costs of the day-to-day servicing of property and equipment are recognized in the statement of profit or loss and comprehensive income (loss) as incurred.


3.3.3

Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value, if any.  Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.  Leased assets are depreciated over the shorter of the lease term or their useful life unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.


The estimated useful lives for the current period are as follows:

  Electronic equipment

3 years

  Motor vehicles

4 years

  Office equipment

5 years

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.  


3.4 Impairment


3.4.1

Financial assets (including receivables)

A financial asset not carried at fair value through profit and loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired.  A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.



F-16




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.4 Impairment (continued)


3.4.1

Financial assets (including receivables) (continued)


The Company considers evidence of impairment for trade and other receivables at both a specific asset and collective levels.  All individually significant accounts receivables are assessed for specific impairment.  All individually significant accounts receivable found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified.  Trade and other receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.


In assessing collective impairment, the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.


An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against receivables.  When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.


3.5 Non-financial assets


The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment.  If any such indication exists, then the asset’s recoverable amount is estimated and adjusted accordingly.


The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.



F-17




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.5 Non-financial assets  (continued)


An impairment loss is recognized if the carrying amount of an asset exceeds its estimated recoverable amount.  Impairment losses are recognized in profit and loss.


Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.  An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.  An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.


The Company has the following non-financial asset: property and equipment, prepayments, inventories, deferred offering costs, and deferred slotting fees.


Deferred slotting fees

In connection with the Company’s product promotion and placement services, the Company is required to prepay each store where it places a vendor’s product, an annual slotting fee, which is shown as deferred slotting fees in the accompanying statement of financial position. As each slotting fee contract is renewed annually, the deferred slotting fees will be recognized within the following twelve months.


Deferred offering costs

Deferred offering costs consist principally of legal, accounting, and underwriters’ fees incurred that are related to a proposed offering and that will be charged to share premium upon the completion of the proposed offering or charged to expense if the proposed offering is not completed.  The deferred offering costs for the six months ended 31 May 2016 consist of the following:

 

 

 

 

    

 

 

 

 

 

Accountings fees

 

 

 

$

76,486

Legal fees

 

 

 

65,363

Investment bank fees

 

 

 

97,817

Consulting expenses

 

 

 

75,948

Other expenses

 

 

 

21,080

Total deferred offering costs as at 31 May 2016

 

 

 

$

336,694



F-18




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.6 Statutory reserve fund


Pursuant to corporate law of the PRC, the Company is required to transfer 10% of its net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of the Company’s registered capital.  The statutory reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or used to increase registered capital, provided that the remaining reserve balance after use is not less than 25% of registered capital.  The required statutory reserve fund transfer was $268,189 for the six months ended 31 May 2016.


3.7 Revenue recognition


Revenue from the sale of goods in the course of ordinary activities is measured at the amount of the consideration received or receivable, net of estimated returns, trade discounts and volume rebates.  Revenue is recognized when persuasive evidence exists, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.  If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.


The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale.  For sales of goods, usually transfer occurs when the product is received at the customer’s warehouse.



F-19




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.8Income taxes


Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to taxes payable in respect of previous years.


Deferred taxes are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.  Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.  Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.


A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.  Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.  A valuation allowance is established to reduce deferred tax assets to the amount expected to be realized.  


Revenues, expenses and assets are recognized net of the amount of sales tax. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statement of financial position.


In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events.  New information may become available that causes the Company to change its judgements regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.  The Company believes that its current accruals for tax liabilities are adequate for all open tax years based on its assessment of relevant factors as well as the prevailing tax rules.  However, there can be no assurance that the tax authorities will agree with this position, and therefore the Company ultimately could be liable for income taxes, interest and penalties.



F-20




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.9 New standards and interpretations not yet adopted


A number of new standards, amendments to standards and interpretations have been issued since 31 May 2016 up to the date of authorization of the financial statements which are not yet effective and, have not been applied in preparing these financial statements.  None of these new standards or amendments to standards when effective are expected to have a material effect on the consolidated financial statements of the Company except for the following:


IFRS 15 – Revenue from Contracts with Customers, which is effective, after amendment, for periods beginning on or after 1 January 2018.  IFRS 15 sets forth the requirements for recognizing revenue that applies to all contracts with customers.  The Company is in the process of determining the possible effects, if any, on its financial reporting.


IFRS 16 – Leases, which is effective for periods beginning on or after 1 January 2019. IFRS principally requires lessees to recognize assets and liabilities for all leases with terms longer than 12 months and to present the rights and obligations associated with these leases in the statement of financial position.  IFRS 16 eliminates the classification of leases as either operating leases or finance leases for a lessee.  Instead all leases are treated in a similar way to finance leases applying IAS 17.  The Company is in the process of determining the possible effects, if any, on its financial reporting.


4.

DETERMINATION OF FAIR VALUES


A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.  Fair values have been determined for measurement and/or disclosure purposes based on the following methods.  When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.


4.1 Inventories


The fair value of inventories is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories.




F-21




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


4.

DETERMINATION OF FAIR VALUES (continued)


4.2 Trade and other receivables


Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value.  The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.  This fair value is determined for disclosure purposes.


4.3 Non-derivative financial liabilities


Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.


5.

FINANCIAL RISK MANAGEMENT


5.1 Credit risk


Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s trade and other receivables from customers.


5.1.1

Receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.  In the normal course of business, the Company grants credit to its customers based on credit evaluations of their financial condition and generally requires no collateral or other security.  No major customers were identified for the six months ended 31 May 2016.


Trade receivables are non-interest bearing and are generally on terms of 30-90 days.  The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.  The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. On a periodic basis, management evaluates accounts receivable balances and establishes an allowance, based on history of past write-offs and collections.  As at 31 May 2016, the Company considers all accounts receivable to be fully collectible and, therefore, did not provide for an allowance for doubtful accounts.  



F-22




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


5.

FINANCIAL RISK MANAGEMENT (continued)


The aging of receivables as at 31 May 2016 was as follows:

 

 

 

 

 

 

 

 

 Gross

Impairment

 

 

 

 

 

Not past due

 

 

$

1,291

$

-

Past due 0-30 days

 

 

-

-

Past due 31-60 days

 

 

-

-

More than 60 days

 

 

-

-

 

 

 

$

1,291

$

-


5.2 Cash


Substantially all of the Company’s assets and bank accounts are in banks located in the PRC.  The exchange rate of the RMB is determined by the government of the PRC and the remittance of funds out of the PRC is subject to exchange restrictions imposed by the government of the PRC.


5.3 Liquidity risk


Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.  The Company’s approach to manage liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.


5.4 Market risk


The Company is exposed to market risk through its use of financial instruments and specifically to interest rate risk, which result from its operating activities.  The change of economic conditions causes the risks, and the Company works to mitigate the risks.



F-23




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


5.

FINANCIAL RISK MANAGEMENT (continued)


5.5 Capital management


The Company’s debt to adjusted capital ratio at 31 May 2016 was as follows:

 

 

 

                                 

   

 

 

 

 

 

Total liabilities

 

 

 

$

3,756,298

Less: cash and cash equivalents

 

 

 

12,015,425

Net debt

 

 

 

-

Total equity

 

 

 

$

13,013,865

Net debt to capital ratio

 

 

 

-


6.

INCOME TAX EXPENSE


6.1 Provision for income taxes


The provision for income taxes for the six months ended 31 May 2016 consists of the following:

 

 

 

 

  

 

 

 

 

 

Current

 

 

 

$

1,482,333

Deferred

 

 

 

-

Total income tax provision

 

 

 

$

1,482,333


6.2 Reconciliation of effective tax rate


 

 Tax rate

     Amount

Operating profit before income tax expense

 

     $ 4,163,491  

Tax using the Company’s domestic tax rate

   25.00%

     1,040,873

Tax effect of:

Non-deductible expenses due to

     share compensation

      Changes in estimates related to prior years

    


10.57%

  0.03%

    


        440,171

            1,289

 

   35.60%

  $ 1,482,333



F-24




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


7.

DEPOSIT


On 16 May 2016, the Company and the shareholders of Chenzhou Qianlifeng Beverage Co., Ltd. (“Qianlifeng”) signed an Agreement of Acquisition Intention (“the agreement”) to transfer 100% ownership in Qianlifeng to the Company for RMB 5,000,000 (approximately USD 768,000).  This agreement is subject to various preconditions, which must be satisfactorily completed prior to 31 December 2016.


An initial payment of 20% (RMB 1,000,000) of the total price was made by the Company on 20 May 2016.  The amount is reflected as a $151,895 deposit on the consolidated statement of financial position as at 31 May 2016.  The payment was made into a joint account managed by the Company and the shareholders of Qianlifeng.  Upon satisfactory completion of the preconditions of the agreement, the remaining balance shall also be paid into the same account.


8.

PREPAYMENTS


As at 31 May 2016, the majority of the prepayments consist of advertising expenses made in advance to various vendors.


9.

PROPERTY AND EQUIPMENT


9.1 Carrying amounts of property and equipment


As at 31 May 2016, the carrying amounts of property and equipment consist of the following:

 

 

 

 

    

 

 

 

 

 

Electronic equipment

 

 

 

$

106,018

Motor vehicles

 

 

 

294,647

Office equipment

 

 

 

81,525

Total property and equipment, net

 

 

 

$

482,190



F-25




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


9.

PROPERTY AND EQUIPMENT (continued)


9.2 Cost or deemed cost


The cost or deemed cost of the property and equipment for the six months ended 31 May 2016 consists of the following:

 


Electronic equipment


Motor

vehicles


Office

equipment



Total

 

 

 

 

 

As at 30 November 2015

$

120,974 

$

60,552 

$

103,358 

$

284,884 

Additions

25,137 

270,254 

764 

296,155 

Disposals

Effect of exchange rate  

    fluctuations

(3,524)

(4,481)

(2,793)

(10,798)

As at 31 May 2016

$

142,587 

$

326,325 

$

101,329 

$

570,241 


9.3 Depreciation and impairment losses


The depreciation and impairment losses of property and equipment for the six months ended 31 May 2016 consist of the following:


 


 


Electronic equipment


Motor

vehicles


Office

equipment



Total

 

 

 

 

 

 

As at 30 November 2015

 

$

16,048 

$

6,308 

$

10,004 

$

32,360 

Depreciation for the period

 

21,175 

25,814 

10,178 

57,167 

Impairment loss

 

Effect of exchange rate

    fluctuations

 

(654)

(444)

(378)

(1,476)

As at 31 May 2016

 

$

36,569 

$

31,678 

$

19,804 

$

88,051 





F-26




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


10.

TRADE AND OTHER PAYABLES AND ADVANCE FROM CUSTOMERS


Trade and other payables and advance from customers at 31 May 2016 consist of the following:

 

      

 

             

 

   

 

 

 

 

 

 

Trade and other payables

 

 

 

 

$

819,752

Advance from customers

 

 

 

 

778,234

 

 

 

 

 

$

1,597,986


11.

BORROWINGS


The borrowings from third parties of $89,673 as at 31 May 2016 consist of a $77,800 short-term borrowing from unrelated third parties for the capital contribution to WFOE, and a $11,873 short-term borrowing from an unrelated third party for the professional fees paid on behalf of the Company.


Amount owed to the prior shareholder of Guangdong Tianmei totaling $614,056 was fully repaid during the six months ended 31 May 2016.


12.

CONVERTIBLE DEBT PAYABLE


On 29 March 2016, the Company issued convertible notes with a 6% per annum interest rate to three unrelated individuals in the principal amounts of RMB 1,000,000 (approximately USD 153,000), RMB 5,000,000 (approximately USD 763,000), and RMB 600,000 (approximately USD 87,000), respectively.  The holder of the note is entitled to convert all or a portion of the convertible note plus accrued interest, if any, at the lender’s sole option, into shares of common stock of the Company at a conversion price of the issue price on the conversion date.   


Subsequent to 31 May 2016, on 29 June 2016, the Company repaid the three convertible notes in full.




F-27




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


13.

SHARE CAPITAL

 

 

 

Ordinary shares

In issue as at 1 December 2015

-

Issued for cash

48,000,000

Issued for compensation

12,000,000

Issued for ownership exchange

60,000,000

In issue as at 31 May 2016 – by paid in cash

60,000,000

In issue as at 31 May 2016 – by paid in subsidiary ownership

60,000,000

Authorized – par value $0

120,000,000


Ordinary shares

All shares rank equally with regards to the Company’s residual assets.  The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.  


As at 31 May 2016, a total of 120,000,000 shares were issued and outstanding to ten shareholders.  On 6 May 2016, 48,000,000 ordinary shares were issued to three shareholders for cash, and 6,000,000 ordinary shares were issued to five shareholders for compensation.  Those ordinary shares were issued at an exercise price of AUD $ 0.20 per share in a total of AUD $12,000,000 (approximately USD 8,839,000).  The remaining three shareholders paid in their ownership in Guangdong Tianmei for exchange of the 66,000,000 ordinary shares in the Company.


14.

RELATED-PARTY


14.1 Related party transactions


In the normal course of business, the Company conducts certain transactions with Guangdong Gewang Biotechnology Co., Ltd. (“Gewang”), a related party affiliated by common control, and Biotechnology International, a related party with 30% ownership of the Company.  Gewang and Biotechnology International are both 100% subsidiaries of China Gewang Biotechnology, Inc. (“China Gewang”).




F-28




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


14.

RELATED-PARTY (continued)


14.1 Related party transactions (continued)


The following is a summary of balances and significant transactions with related parties as at and for the six months ended 31 May 2016:

 

 

 

 

 

 

Receivable for equity share:

 

 

 

 

 

 

 

 

 

Biotechnology International

 

 

 

$

1,000,000

 

 

 

 

 

Trademark expenses:

 

 

 

 

 

 

 

 

 

Gewang

 

 

 

$

895


Outstanding balances at 31 May 2016 are unsecured and non-interest bearing.


14.2 Trademark


The Company entered into an agreement on 10 June 2015 for the right to use Gewang’s trademark for 10 years.  The future commitment is approximately $1,500 each year.


14.3 Key management personnel compensation


Key management personnel’s annual compensation is comprised of the following:

 

 

 

 

       

 

Short-term employee benefits

 

 

 

 

$

65,563

Post-employment benefits

 

 

 

 

-

Termination benefits

 

 

 

 

-

Other long-term benefits

 

 

 

 

-

Share-based payments

 

 

 

 

-

 

 

 

 

 

$

65,563





F-29




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


15.

FINANCIAL INSTRUMENTS


15.1 Credit risk


15.1.1 Exposure to credit risk

The carrying amount of financial assets represents the Company’s maximum credit exposure.  The maximum exposure to credit risk as at 31 May 2016 was as follows:


 

 

 

 

 

 

 

Trade and other receivables

 

 

 

 

 

$

1,291

Cash and cash equivalents

 

 

 

 

 

12,015,425

 

 

 

 

 

 

$

12,016,716


15.2 Liquidity risk


The following are the contractual maturities (including interest payments where applicable) of financial liabilities.


15.2.1 Non-derivative financial liabilities



31 May 2016

Carrying   amount

Contractual cash flow

6 months or less

6-12 months

More than 1 year

 

 

 

 

 

 

Trade and other payables

$

819,752

$

819,752

$

819,752

$

-

$

-

Advance from customers

778,234

778,234

778,234

-

-

Taxes payable

1,066,132

1,066,132

1,066,132

-

-

Convertible debt payable

1,002,507

1,002,507

1,002,507

-

-

Borrowings

    – third parties

89,673

89,673

89,673

-

-

 

$

3,756,298

$

3,756,298

$

3,756,298

$

-

$

-





F-30




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


15.

FINANCIAL INSTRUMENTS (continued)


15.3 Fair values


15.3.1 Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated statement of financial position as at 31 May 2016 were as follows:


Assets carried at amortized cost


 

 

Fair Value

 

Carrying amount

(Level I)

(Level II)

(Level III)

Total

Financial liabilities not measured at fair value

 

 

 

 

Trade and other receivables

$

1,291

$

-

$

-

$

-

$

1,291

Cash and cash equivalents

12,015,425

-

-

-

12,015,425

 

$

12,016,716

$

-

$

-

$

-

$

12,016,716


Liabilities carried at amortized cost


 

 

Fair Value

 

Carrying amount

(Level I)

(Level II)

(Level III)

Total

Financial liabilities not measured at fair value

 

 

 

 

Trade and other payable

$

819,752

$

-

$

-

$

-

$

819,752

Advances from customers

778,234

-

-

-

778,234

Taxes payable

1,066,132

-

-

-

1,066,132

Convertible debt payable

1,002,507

-

-

-

1,002,507

Borrowings- third parties

89,673

-

-

-

89,673

 

$

3,756,298

$

-

$

-

$

-

$

3,756,298





F-31




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


15.

FINANCIAL INSTRUMENTS (continued)


15.3.2 Fair value hierarchy

Financial assets and financial liabilities measured at fair value in the consolidated statement of financial position are grouped into three levels of the fair value hierarchy.  This grouping is determined based on the lowest level of significant inputs used in the fair value measurement, as follows:


Level 1:

quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2:

inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3:

inputs for the asset or liability that are not based on observable market data (unobservable inputs)


As at 31 May 2016, carrying values of non-derivative financial instruments disclosed above, approximate fair values due to the short term nature of these financial instruments.


16.

OPERATING LEASE ARRANGEMENTS


16.1 Leasing arrangements


Guangdong Tianmei leases its office space under a five-year operating lease from an unrelated third party, which started on 1 May 2015 and expires on 30 April 2020.  Guangdong Tianmei leases its warehouse under a three-year operating lease from an unrelated third party, which started on 1 March 2016 and expires on 28 February 2019.  Upon the expiration of the lease, Guangdong Tianmei is required to return the properties to the landlord in their original condition.




F-32




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


16.

OPERATING LEASE ARRANGEMENTS (continued)


16.2 Payments recognized as an expense


 

 

 

 

 

 

Minimum lease payments

 

 

 

 

     $  48,840

 

 

 

 

 

 

16.3 Non-cancellable operating lease commitments


 

 

 

Not later than 1 year

 

$ 103,250

Later than 1 year and not later than 5 years

 

288,147

Later than 5 years

 

 -


17.

COST OF SALES


17.1 Details of cost of sales


The following schedule is the reconciliation of cost of sales for the six months ended 31 May 2016:

 

 

    

 

    

 

 

 

 

 

Cost of sales:

 

 

 

 

Inventory, beginning of period

 

 

 

$                -

Amortization of slotting fees

 

 

 

1,759,269

Purchases

 

 

 

2,727,548

 

 

 

 

 

 

 

 

 

      4,486,817

Less: inventory, end of period

 

 

 

314,576

Effect of exchange rate fluctuations

 

 

 

(3,353)

Total cost of sales

 

 

 

$ 4,168,888



F-33




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


18.

OPERATING EXPENSES


18.1 Details of selling and distribution expenses:


The selling and distribution expenses the six months ended 31 May 2016 consist of the following:

 

 

        

 

        

 

 

 

 

 

SELLING AND DISTRIBUTION:

 

 

 

 

Salaries and wages

 

 

 

$    347,417

Fringe benefits

 

 

 

71,522

Advertising expenses

 

 

 

404,885

Rent

 

 

 

30,627

Depreciation

 

 

 

37,255

Maintenance and repairs

 

 

 

11,817

Utilities

 

 

 

2,675

Travel

 

 

 

22,195

Conference expenses

 

 

 

6,505

Total selling and distribution expenses

 

 

 

$    934,898


18.2 Details of administrative expenses:


The administrative expenses for the six months ended 31 May 2016 consist of the following:

 

 

 

 

       

 

 

 

 

 

ADMINISTRATIVE:

 

 

 

 

Salaries and wages

 

 

 

$      93,642

Fringe benefits

 

 

 

19,764

Share compensation

 

 

 

1,762,218

Travel

 

 

 

13,152

Office expense

 

 

 

14,300

Rent

 

 

 

18,422

Depreciation

 

 

 

19,912

Utilities

 

 

 

2,018

Maintenance and repair

 

 

 

1,356

Bank charges

 

 

 

3,684

Other expenses

 

 

 

1,382

Conference expenses

 

 

 

13,930

Directors expenses

 

 

 

3,684

Trademark

 

 

 

2,738

Total administrative expenses

 

 

 

$  1,970,202




F-34




TIANMEI BEVERAGE GROUP CORPORATION LIMITED AND SUBSIDIARIES


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


18.

OPERATING EXPENSES (continued)


18.3 Details of financing expenses:


The financing expenses for the six months ended 31 May 2016 consist of the following:

 

 

        

 

        

 

 

 

 

 

FINANCING

 

 

 

 

Interest on convertible note

 

 

 

$      9,476


18.4 Details of research and development expenses:


The research and development expenses for the six months ended 31 May 2016 consist of the following:

 

 

        

 

        

 

 

 

 

 

RESEARCH AND DEVELOPMENT

 

 

 

 

Consulting expenses relating to product development

 

 

 

$  390,327


19.

SUBSEQUENT EVENTS


The Company’s management has performed subsequent events procedures through 12 November 2016, which is the date the consolidated financial statements were available to be issued.  Except for the matters discussed in Notes 1 and 12, there are no subsequent events requiring adjustment to the consolidated financial statements or disclosure as stated herein.




F-35




[form8k51616tianmeiamno1003.jpg]


INDEPENDENT AUDITORS’ REPORT


Shareholders and Board of Directors

Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd.


Report on the Financial Statements


We have audited the accompanying financial statements of Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd., which comprise the statement of financial position as at 30 November 2015, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the period from 22 May 2015 (inception) to 30 November 2015, and a summary of significant accounting policies and other explanatory information.


Management’s Responsibility for the Financial Statements


Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.


Auditors’ Responsibility


Our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audit in accordance with International Standards on Auditing.  Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.


An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.  The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


Opinion


In our opinion, the financial statements give a true and fair view of the financial position of Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd. as at 30 November 2015, and of its financial performance and its cash flows for the period from 22 May 2015 (inception) to 30 November 2015 in accordance with International Financial Reporting Standards.


/s/ Wei, Wei & Co. LLP


Liren Wei

Managing Partner


17 February 2016

New York, United States of America



F-36




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE PERIOD FROM 22 MAY 2015 (INCEPTION) TO 30 NOVEMBER 2015

IN US DOLLARS


 

 

 

 

 

 

 

Notes

 

 

 

 

 

 

 

 

 

 

Revenue

3.6

 

 

 

4,856,251 

Cost of sales

13

 

 

 

(1,878,928)

  Gross profit

 

 

 

 

2,977,323 

 

 

 

 

 

 

Other operating income

 

 

 

 

529 

Selling and distribution expenses

14.1

 

 

 

(391,360)

Administrative expenses

14.2

 

 

 

(224,017)

  Operating profit before income tax expense

 

 

 

 

2,362,475 

 

 

 

 

 

 

Income tax expense

6

 

 

 

(590,803)

   Profit for the period

 

 

 

 

1,771,672 

 

 

 

 

 

 

Other comprehensive (loss):

 

 

 

 

 

Exchange differences on translating foreign currencies

 

 

 

 

(33,408)

 

 

 

 

 

 

TOTAL COMPREHENSIVE INCOME FOR

 

 

 

 

 

THE PERIOD

 

 

 

 

1,738,264


The notes on pages F-42 to F-60 are an integral part of these financial statements.




F-37




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


STATEMENT OF FINANCIAL POSITION

AS AT 30 NOVEMBER 2015

IN US DOLLARS


ASSETS

Notes

 

 

 

 

Non-current assets

 

 

Property and equipment, net

7

252,524

  Non-current assets

 

252,524

 

 

 

Current assets

 

 

Deferred slotting fees

3.4

1,303,901

Trade and other receivables

5.1

1,811

Cash and cash equivalents

3.1.1

1,418,052

  Current assets

 

2,723,764

 

 

 

TOTAL ASSETS

 

2,976,288




The notes on pages F-42 to F-60 are an integral part of these financial statements.




F-38





GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


STATEMENT OF FINANCIAL POSITION

AS AT 30 NOVEMBER 2015

IN US DOLLARS


 

 

 

 

 

 

EQUITY AND LIABILITIES

Notes

 

  

 

  


Equity

 

 

 

 

 

Statutory reserve fund

3.5

 

 

 

177,241 

Retained earnings

 

 

 

 

1,594,431 

Other comprehensive (loss)

 

 

 

 

(33,408)

  Total equity

 

 

 

 

1,738,264 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

8

 

 

 

216,358 

Advance from customers

8

 

 

 

125,226 

Taxes payable

 

 

 

 

272,040 

Borrowings - shareholders  

9

 

 

 

624,400 

  Current liabilities

 

 

 

 

1,238,024 

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

 

 

 

2,976,288 




The notes on pages F-42 to F-60 are an integral part of these financial statements.






F-39




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.



STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD FROM 22 MAY 2015 (INCEPTION) TO 30 NOVEMBER 2015

IN US DOLLARS



 

 

Statutory

 

 

 

Other

 

 

 

 

Reserve

 

Retained

 

Compre-

 

Total

 

 

Fund

 

Earnings

 

hensive (loss)

 

Equity

 

 

 

 

 

 

 

 

 

Balance – 22 May 2015 (inception)

 

-

 

 

 

Profit for the period

 

-

 

1,771,672 

 

 

1,771,672 

Statutory reserve

 

177,241

 

(177,241)

 

 

Other comprehensive (loss)

 

-

 

 

(33,408)

 

(33,408)

Balance – 30 November 2015

 

177,241

 

1,594,431 

 

(33,408)

 

1,738,264 














The notes on pages F-42 to F-60 are an integral part of these financial statements.




F-40




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.



STATEMENT OF CASH FLOWS  

FOR THE PERIOD FROM 22 MAY 2015 (INCEPTION) TO 30 NOVEMBER 2015

IN US DOLLARS

 

 

 

 

 

 

 

Notes

 

 

 

   

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES :

 

 

 

 

 

Profit for the period

 

 

 

 

1,771,672

Non-cash adjustment to reconcile profit after tax

to net cash flows:

 

 

 

 

 

  Depreciation

7.3

 

 

 

32,980

  Income tax expense

6

 

 

 

590,803

Working capital adjustments:

 

 

 

 

 

  Change in deferred slotting fees

3.4

 

 

 

(1,303,901)

  Change in trade and other receivables

5.1.1

 

  

 

(1,811)

  Change in trade and other payables

8

 

  

 

216,358

  Change in advance from customers

8

 

   

 

125,226

Cash generated from operating activities

 

 

 

 

1,431,327

Interest paid

 

 

 

 

-

Income taxes paid

 

 

 

 

(363,141)

Net cash provided by operating activities

 

 

  

 

1,068,186

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES :

 

 

 

 

 

Purchase of property and equipment

7.2

 

 

 

(290,358)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES :

 

 

 

 

 

Proceeds from borrowings

9

 

  

 

636,400

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH      EQUIVALENTS

 

 

 

 

1,414,228

Cash and cash equivalents - beginning

 

 

 

 

-

Effect of exchange rate fluctuations on cash and cash equivalents

 

 

 

 

3,824

CASH AND CASH EQUIVALENTS - ENDING

 

 

 

 

1,418,052




The notes on pages F-42 to F-60 are an integral part of these financial statements.




F-41




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


1.

CORPORATE INFORMATION


Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd. (the “Company”) was founded on 22 May 2015 in the Guangdong Province in the People’s Republic China (“PRC”).  


On 30 November 2015, the Company was owned by three persons, which Mr. Shili Zhang owned 47.94%, Ms. Xiaoqin Zheng owned 6.00% and Ms. Han Xu owned 46.06%.  The registered capital is approximately US Dollar 1,614,000 (RMB 10,000,000).  As at 30 November 2015, the shareholders have not contributed any capital.


The Company’s business is comprised of the following:


Sale of Selenium-Rich Water


The Company has annual contracts with two water companies to bottle, under the Company’s label, water from two springs in the PRC that is rich in the mineral selenium. Selenium is believed to have antioxidant properties and play a key role in the human body metabolism.  The bottled water is purchased by the Company from the suppliers and is delivered directly to the stores based upon monthly orders placed by each store.  Accordingly, the Company does not have any inventory as at 30 November 2015.


Product Promotion and Placement Service


The Company has annual agreements with various vendors to assist them in the placement and marketing of their products.  The Company receives a monthly fee from the vendors based upon the number of items being placed in each store.  The Company has the ability to place these products based upon their relationships with over 800 stores in the Guangdong Province.  In connection with these placement services, the Company enters into annual contracts with each store and must prepay the store an annual “slotting fee” charged for each product placed.  The Company has no responsibility regarding the vendors’ sales performance.




F-42




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


2.

BASIS OF PREPARATION


2.1 Statement of compliance


The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).    


The financial statements were authorized for issue by the Board of Directors on 17 February 2016.


2.2 Basis of measurement


The financial statements have been prepared on a historical cost basis except for assets and liabilities required to be measured at fair value (See Note 4).


2.3 Functional and presentation currency


These financial statements are presented in US dollars, and the Company’s functional currency is the Renminbi (“RMB”).  All financial information presented has been rounded to the nearest US dollar.


2.4 Foreign Currency Translation


All Company assets are located in the PRC.  The functional currency for the Company’s operations is the Renminbi (“RMB”).  The Company uses the United States Dollar (“US Dollar” or “US$” or “$”) for financial reporting purposes.  


For the purpose of presenting the financial statements, the assets and liabilities of the Company are translated into US Dollar using exchange rate prevailing at the end of reporting period.  Income and expenses items are translated at the average exchange rate for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity. For the period from 22 May 2015 (inception) to 30 November 2015, exchange differences on translating RMB to US Dollar of $(33,408) are recognized as other comprehensive loss in the statement of profit or loss and other comprehensive income.  


Although government regulations now allow convertibility of the RMB for current account transactions, significant restrictions still remain.  Hence, such translations should not be construed as representations that the RMB could be converted into US Dollar at that rate or any other rate.




F-43




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


2.

BASIS OF PREPARATION


2.4 Foreign Currency Translation (continued)


The value of the RMB against the US Dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the RMB may materially affect the Company’s financial condition in terms of US Dollar reporting.


2.5 Use of estimates and judgments


The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.


Estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


3.1 Financial instruments


3.1.1

Non-derivative financial assets

The Company initially recognizes trade and other receivables on the date that they are originated.  All other financial assets (including assets designated at fair value through profit or loss) are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.  The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.  Any interest in transferred financial assets that is created or retained by the Company is recognized as a separate asset or liability.


Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.


The Company has the following non-derivative financial assets:




F-44




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.1 Financial instruments (continued)


Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  Such assets are recognized initially at fair value plus any directly attributable transaction costs.  Subsequent to initial, non-current trade and other receivables are measured at amortized cost using the effective interest method, less any impairment losses.


Cash and cash equivalents

Cash and cash equivalents are comprised of cash balances, money market funds and short-term investments with original maturities of three months or less.


3.1.2

Non-derivative financial liabilities

The Company recognizes the liabilities on the trade date at which the Company becomes a party to the contractual provisions of the instrument.  The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.  Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.


The Company has the following non-derivative financial liabilities: trade and other payables, advances from customers, taxes payable, and borrowings.  Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs.  Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method.


3.2 Property and equipment


3.2.1 Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.  Cost includes expenditures that are directly attributable to the acquisition of the asset.  When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.  Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and are recognized net within other income (loss) in the statements of profit or loss and other comprehensive income.




F-45




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.2 Property and equipment (continued)


3.2.2

Subsequent costs

The cost of replacing a part of an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably.  The carrying amount of the replaced part is derecognized.  The costs of the day-to-day servicing of property and equipment are recognized in the statements of comprehensive income as incurred.


3.2.3

Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value, if any.  Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.  Leased assets are depreciated over the shorter of the lease term or their useful life unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.


The estimated useful lives for the current period are as follows:


  Electronic equipment

3 years

  Motor vehicles

4 years

  Office equipment

5 years


Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.  


3.3 Impairment


3.3.1

Financial assets (including receivables)

A financial asset not carried at fair value through profit and loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired.  A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.




F-46




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.3 Impairment (continued)


3.3.1

Financial assets (including receivables) (continued)


The Company considers evidence of impairment for trade and other receivables at both a specific asset and collective levels.  All individually significant accounts receivable are assessed for specific impairment.  All individually significant accounts receivable found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified.  Trade and other receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.


In assessing collective impairment, the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.


An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against receivables.  When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.


3.4 Non-financial assets


The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment.  If any such indication exists, then the asset’s recoverable amount is estimated and adjusted accordingly.


The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.




F-47




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.4 Non-financial assets (continued)


An impairment loss is recognized if the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognized in profit and loss.


Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.  An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.  An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if no impairment loss had been recognized.


The Company has the following non-financial asset: deferred slotting fees.


Deferred slotting fees

In connection with the Company’s product promotion and placement services, the Company is required prepay each store where it places a vendor’s product, an annual slotting fee, which is shown as deferred slotting fees in the accompanying balance sheet. As each slotting fee contract is renewed annually, the deferred slotting fees will be recognized within the following twelve months.


3.5 Statutory reserve fund


Pursuant to corporate law of the PRC, the Company is required to transfer 10% of its net income, as determined under PRC accounting rules and regulations, to a statutory reserve fund until such reserve balance reaches 50% of the Company’s registered capital.  The statutory reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or used to increase registered capital, provided that the remaining reserve balance after use is not less than 25% of registered capital.  The required statutory reserve fund transfer was $177,241 for the period from 22 May 2015 (inception) to 30 November 2015.




F-48




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.6 Revenue recognition


Revenue from the sale of goods in the course of ordinary activities is measured at the amount of the consideration received or receivable, net of estimated returns, trade discounts and volume rebates.  Revenue is recognized when persuasive evidence exists, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.  If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.


The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale.  For sales of goods, usually transfer occurs when the product is received at the customer’s warehouse.


3.7 Income taxes


Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to taxes payable in respect of previous years.


Deferred taxes are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.  Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.  Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.



F-49




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


3.7 Income taxes (continued)


A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.  Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.  A valuation allowance is established to reduce deferred tax assets to the amount expected to be realized.  


Revenues, expenses and assets are recognized net of the amount of sales tax. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statements of financial position.


3.8 New standards and interpretations not yet adopted


A number of new standards, amendments to standards and interpretations have been issued since 30 November 2015 up to the date of authorization of the financial statements which are not yet effective, have not been applied in preparing these financial statements. None of these new standards or amendments to standards when effective are expected to have a material effect on the financial statements of the Company except for IFRS 15 – Revenue from Contracts with Customers, which is effective, after amendment, for periods beginning on or after 1 January 2018.  IFRS 15 sets forth the requirements for recognizing revenue that applies to all contracts with customers.  The Company is in the process of determining the possible effects, if any, on its financial reporting.


4.

DETERMINATION OF FAIR VALUES


A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities.  Fair values have been determined for measurement and/or disclosure purposes based on the following methods.  When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.


4.1 Trade and other receivables


Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value.  The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.  This fair value is determined for disclosure purposes.



F-50




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


4.

DETERMINATION OF FAIR VALUES (continued)


4.2 Non-derivative financial liabilities


Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.


5.

FINANCIAL RISK MANAGEMENT


5.1 Credit risk


Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s trade and other receivables from customers.


5.1.1

Receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.  In the normal course of business, the Company grants credit to its customers based on credit evaluations of their financial condition and generally requires no collateral or other security.  No major customers were identified for the period from 22 May 2015 (inception) to 30 November 2015.


Trade receivables are non-interest bearing and are generally on terms of 30-90 days.  The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.  The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. On a periodic basis, management evaluates accounts receivable balances and establishes an allowance, based on history of past write-offs and collections.  As at 30 November 2015, the Company considers all accounts receivable to be fully collectible and, therefore, did not provide for an allowance for doubtful accounts.




F-51




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


5.

FINANCIAL RISK MANAGEMENT (continued)


5.1 Credit risk (continued)


5.1.1

Receivables (continued)


The aging of receivables as at 30 November 2015 was as follows:

 

 

 

 

 

 

 

 

 Gross

Impairment

 

 

 

 

 

Not past due

 

 

$

1,811

$

-

Past due 0-30 days

 

 

-

-

Past due 31-60 days

 

 

-

-

More than 60 days

 

 

-

-

 

 

 

$

1,811

$

-


5.2 Cash


Substantially all of the Company’s assets and bank accounts are in banks located in the PRC.  The exchange rate of RMB is determined by the government of the PRC and the remittance of funds out of the PRC is subject to exchange restrictions imposed by the government of the PRC.


5.3 Liquidity risk


Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.  The Company’s approach to manage liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.


5.4 Market risk


The Company is exposed to market risk through its use of financial instruments and specifically to interest rate risk, which result from its operating activities.  The change of economic conditions causes the risks, and the Company works to mitigate the risks.



F-52




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


5.

FINANCIAL RISK MANAGEMENT (continued)


5.5 Capital management


The Company’s debt to adjusted capital ratio at 30 November 2015 was as follows:


 

 

 

                                 

   

 

 

 

 

 

Total liabilities

 

 

 

$

1,238,024

Less: cash and cash equivalents

 

 

 

1,418,052

Net debt

 

 

 

$

-

Total equity

 

 

 

$

1,738,264

Debt to capital ratio

 

 

 

-


6.

INCOME TAX EXPENSE


The provision for (benefit from) income taxes for the period from 22 May 2015 (inception) to 30 November 2015 consists of the following:

 

 

 

 

  

 

 

 

 

 

Current

 

 

 

$

590,803

Deferred

 

 

 

-

 

 

 

 

 

Total income tax provision

 

 

 

$

590,803




F-53




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


7.

PROPERTY AND EQUIPMENT


7.1 Carrying amounts of property and equipment


As at 30 November 2015, the carrying amounts of property and equipment consist of the following:

 

 

 

 

    

 

 

 

 

 

Electronic equipment

 

 

 

$

104,926

Motor vehicles

 

 

 

54,244

Office equipment

 

 

 

93,354

Total property and equipment, net

 

 

 

$

252,524


7.2 Cost or deemed cost


The cost or deemed cost of the property and equipment for the period from 22 May 2015 (inception) to 30 November 2015 consists of the following:

 



Electronic equipment


Motor

vehicles


Office

equipment



Total

 

 

 

 

 

 

At 22 May 2015

 

$

-

$

-

$

-

$

-

Additions

 

120,974

60,552

103,358

284,884

Disposals

 

-

-

-

-

At 30 November 2015

 

$

120,974

$

60,552

$

103,358

$

284,884


7.3 Depreciation and impairment losses


The depreciation and impairment losses of the property and equipment for the period from 22 May 2015 (inception) to 30 November 2015 consist of the following:


 


 


Electronic equipment


Motor

vehicles


Office

equipment



Total

 

 

 

 

 

 

At 22 May 2015

 

$

-

$

-

$

-

$

-

Depreciation for the period

 

16,048

6,308

10,004

32,360

Impairment loss

 

-

-

-

-

At 30 November 2015

 

$

16,048

$

6,308

$

10,004

$

32,360




F-54




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


8.

TRADE AND OTHER PAYABLES AND ADVANCE FROM CUSTOMERS


Trade and other payables and advance from customers at 30 November 2015 consist of the following:

 

      

 

             

 


   

 

 

 

 

 

 

 

 

Trade and other payables

 

 

 

 

$

156,839

 

Accrued expenses

 

 

 

 

59,519

 

Advance from customers

 

 

 

 

125,226

 

 

 

 

 

 

$

341,584

 


9.

BORROWINGS


The Company obtained a short-term non-interest bearing loan from one of its shareholders due as at 31 December 2015.  The loan of $624,400 as at 30 November 2015 is reflected as borrowings. The Company repaid $312,000 in December 2015. In January 2016, the Company paid off the remaining balance of $312,400 plus approximately $6,000 of penalties for the late payment.


10.

RELATED-PARTY


10.1 Related party transactions


In the normal course of business, the Company conducts certain transactions with one of its shareholders and Guangdong Gewang Biotechnology Co., Ltd., a related party (“Gewang”).


The following is a summary of balances and significant transactions with related parties as at 30 November 2015 and for the period from 22 May 2015 (inception) to 30 November 2015:


Other payables:

 

 

 

              

 

 

 

 

 

 

 

Gewang

 

 

 

 

$

650

 

 

 

 

 

 

Borrowings:

 

 

 

 

 

 

 

 

 

Shareholder

 

 

 

$

624,400


Outstanding balances at 30 November 2015 are unsecured and non-interest bearing.



F-55




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


10.

RELATED-PARTY (continued)


10.2 Trademark


The Company entered into an agreement on 10 June 2015 for the right to use Gewang’s trademark for 10 years.  The future commitment is approximately $1,600 each year.


10.3 Key management personnel compensation


Key management personnel compensation for the period from 22 May 2015 (inception) to 30 November 2015 is comprised of the following:

 

 

 

 

       

 

Short-term employee benefits

 

 

 

 

$

65,563

Post-employment benefits

 

 

 

 

-

Termination benefits

 

 

 

 

-

Other long-term benefits

 

 

 

 

-

Share-based payments

 

 

 

 

-

 

 

 

 

 

$

65,563


11.

FINANCIAL INSTRUMENTS


11.1 Credit risk


11.1.1 Exposure to credit risk

The carrying amount of financial assets represents the Company’s maximum credit exposure.  The maximum exposure to credit risk as at 30 November 2015 was as follows:


 

 

Carry amount

 

 

 

Trade and other receivables

 

$

1,811

Cash and cash equivalents

 

1,418,052

 

 

$

1,419,863


11.2 Liquidity risk


The following are the contractual maturities (including interest payments where applicable) of financial liabilities.



F-56




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


11.

FINANCIAL INSTRUMENTS (continued)


11.2 Liquidity risk(continued)


11.2.1 Non-derivative financial liabilities



30 November 2015

Carrying   amount

Contractual cash flow

6 months or less

6-12 months

More than 1 year

 

 

 

 

 

 

Trade and other payables

$

216,358

$

216,358

$

216,358

$

-

$

-

Advance from customers

125,226

125,226

125,226

-

-

Taxes payable

272,040

272,040

272,040

-

-

Borrowings

624,400

624,400

624,400

-

-

 

$

1,238,024

$

1,238,024

$

1,238,024

$

-

$

-


11.3

Fair values


11.3.1 Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position as at 30 November 2015 were as follows:


Assets carried at amortized cost


 

 

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

(Level I)

 

(Level II)

 

(Level III)

Total

 

 

 

 

 

 

 

 

 

 

Trade and other receivables

 

$

1,811

 

$

1,811

 

$

-

 

$

-

$

1,811

Cash and cash equivalents

 

1,418,052

 

1,418,052

 

-

 

-

1,418,052

 

 

 

 

 

 

 

 

 

 

 

 

$

1,419,863

 

$

1,419,863

 

$

-

 

$

-

$

1,419,863




F-57




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


11.

FINANCIAL INSTRUMENTS (continued)


11.3 Fair values (continued)


11.3.1 Fair values versus carrying amounts (continued)


Liabilities carried at amortized cost


 

 

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

(Level I)

 

(Level II)

 

(Level III)

Total

 

 

 

 

 

 

 

 

 

 

Trade and other payables

 

$

216,358

 

$

216,358

 

$

-

 

$

-

$

216,358

Advance from customers

 

125,226

 

125,226

 

-

 

-

125,226

Taxes payable

 

272,040

 

272,040

 

-

 

-

272,040

Borrowings

 

624,400

 

624,400

 

-

 

-

624,400

 

 

 

 

 

 

 

 

 

 

 

 

$

1,238,024

 

$

1,238,024

 

$

-

 

$

-

$

1,238,024


11.3.2

Fair value hierarchy

Financial assets and financial liabilities measured at fair value in the statement of financial poistion are grouped into three levels of the fair value hierarchy.  This grouping is determined based on the lowest level of significant inputs used in the fair value measurement, as follows:


Level 1:

quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2:

inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3:

inputs for the asset or liability that are not based on observable market data (unobservable inputs)


As at 30 November 2015, carrying values of non-derivative financial instruments disclosed above, approximate fair values due to the short term nature of these financial instruments.  




F-58




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


12.

OPERATING LEASE ARRANGEMENTS


12.1 Leasing arrangements


The Company leases its office space under a five-year operating lease from an unrelated third party, which started on 1 May 2015 before the Company was founded on 22 May 2015 and expires on 30 April 2020.  Upon the expiration of the lease, the Company is required to return the property to the landlord in its original condition.


12.2 Payments recognized as an expense


 

 

 

 

 

 

Minimum lease payments

 

 

 

 

$

55,680

 

 

 

 

 

 

12.3 Non-cancellable operating lease commitments


 

 

 

 

 

Not later than 1 year

 

 

 

$

93,660

Later than 1 year and not later than 5 years

 

 

 

320,005

Later than 5 years

 

 

 

-

 

 

 

 

 

13.

COST OF SALES


13.1 Details of cost of sales


The following schedule is the reconciliation of cost of sales for the period from 22 May 2015 (inception) to 30 November 2015:

 

 

    

 

    

 

 

 

 

 

Cost of sales:

 

 

 

 

Inventory, inception

 

 

 

$

-

Amortization of slotting fees

 

 

 

930,367

Purchases

 

 

 

948,561

 

 

 

 

 

 

 

 

 

1,878,928

Less: inventory, end of period

 

 

 

-

Total cost of sales

 

 

 

$

1,878,928





F-59




GUANGDONG TIANMEI SELENIUM-RICH BEVERAGE CHAIN CO., LTD.


NOTES TO FINANCIAL STATEMENTS


14.

  OPERATING EXPENSES


14.1 Details of selling and distribution expenses:


The selling and distribution expenses for the period from 22 May 2015 (inception) to 30 November 2015 consist of the following:

 

 

        

 

        

 

 

 

 

 

SELLING AND DISTRIBUTION

 

 

 

 

Salaries and wages

 

 

 

$

253,351

Advertising expenses

 

 

 

52,145

Rent

 

 

 

28,638

Depreciation

 

 

 

19,509

Utilities

 

 

 

2,363

Travel expenses

 

 

 

34,691

Trademark expenses

 

 

 

663

Total selling and distribution expenses

 

 

 

$

391,360


14.2 Details of administrative expenses:


The administrative expenses for the period from 22 May 2015 (inception) to 30 November 2015 consist of the following:

 

 

 

 

       

 

 

 

 

 

ADMINISTRATIVE

 

 

 

 

Salaries and wages

 

 

 

$

66,601

Fringe benefits

 

 

 

12,406

Start-up fees

 

 

 

21,391

Travel expenses

 

 

 

11,270

Office expenses

 

 

 

14,019

Rent

 

 

 

19,092

Depreciation

 

 

 

13,471

Utilities

 

 

 

1,934

Professional fees

 

 

 

60,000

Bank charges

 

 

 

3,833

Total administrative expenses

 

 

 

$

224,017




F-60




Unaudited Pro Forma Condensed Consolidated Financial Information

 

On April 28, 2016, Biotechnology International Holding Ltd. (“Biotechnology International”) a wholly-owned subsidiary of China Gewang Biotechnology, Inc. (the “Company”), made an investment in Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd. (“Guangdong Tianmei”).  Guangdong Tianmei was organized in May 2015, and is engaged in the business of distributing selenium-rich bottled water and also functions as a placement agent for a variety of products from various manufacturers, all within the People’s Republic China (“PRC”).  The investment was US$1,000,000 for a 30% interest in an Australian corporation, which would indirectly own all of the equity in Guangdong Tianmei.


The acquisition by Biotechnology International of 30% of Tianmei Beverage Group Corporation Limited, an Australian corporation ("Tianmei Australia") was completed in May 2016, at which time Tianmei Australia acquired ownership, through wholly-owned subsidiaries, of Guangdong Tianmei.  The investment agreement required the payment of $1,000,000 by June 20, 2016, which was paid on June 17, 2016.  


The following unaudited pro forma condensed consolidated statements of operations and other comprehensive income have been derived from the audited consolidated statement of income and comprehensive income of the China Gewang Biotechnology, Inc. and Subsidiaries for the year ended November 30, 2015, and the audited statement of profit or loss and other comprehensive income of Guangdong Tianmei Selenium-Rich Beverage Chain Co., Ltd. for the period from May 22, 2015 (inception) to November 30, 2015, and such information was adjusted to reflect to the effect as if the investment occurred on May 22, 2015 during the year ended November 30, 2015.


All of the following financial statements are presented in U.S. dollars.




F-61





Unaudited Pro Forma Condensed Consolidated Statements of Operations and Other Comprehensive Income

For the year ended November 30, 2015

(U.S. Dollars)


 

 China Gewang

 

 Guangdong

 

 

 

 

 

 

 

 and subsidiaries

 

 Tianmei

 

 Debits

 

 Credits

 

 Pro Forma

 

 

 

 

 

 

 

 

 

 

Revenue

$

4,184,255 

 

$

4,856,251 

 

 

 

 

 

$

4,184,255 

Cost of Sales

(1,186,461)

 

(1,878,928)

 

 

 

 

 

(1,186,461)

   Gross profit

2,997,794 

 

2,977,323 

 

 

 

 

 

2,997,794 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

   Other operating income

 

(529)

 

 

 

 

 

   Selling and marketing

836,040 

 

391,360 

 

 

 

 

 

836,040 

   General and administrative

528,627 

 

224,017 

 

 

 

 

 

528,627 

      Total operating expenses

1,364,667 

 

614,848 

 

 

 

 

 

1,364,667 

Operating income

1,633,127 

 

2,362,475 

 

 

 

 

 

1,633,127 

 

 

 

 

 

 

 

 

 

 

Other Income

 

 

 

 

 

 

 

 

 

   Interest income

13,508 

 

 

 

 

 

 

13,508 

Income before provision for income taxes

1,646,635 

 

2,362,475 

 

 

 

 

 

1,646,635 

Provision for income taxes

457,922 

 

590,803 

 

 

 

 

 

457,922 

Equity in earnings of investee

 

 A

521,479

 

 

 

521,479 

 

 

 

 

 

 

 

 

 

 

Net income before noncontrolling interests

1,188,713 

 

1,771,672 

 

 

 

 

 

1,710,192 

Noncontrolling interests

(61,790)

 

 

 

 

 

 

(61,790)

Net income attributable to common stockholders

1,126,923 

 

1,771,672 

 

 

 

 

 

1,648,402 

Earnings per common share

0.03 

 

 

 

 

 

 

 

0.04 

Weighted average shares outstanding

40,944,444 

 

 

 

 

 

 

 

40,944,444 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

 

  Net Income before noncontrolling interests

1,188,713 

 

1,771,672 

 

 

 

 

 

1,710,192 

  Foreign currency translation adjustment

(315,020)

 

(33,408)

 

 

 

 

 

(315,020)

 

 

 

 

 

 

 

 

 

 

Comprehensive income

873,693 

 

1,738,264 

 

 

 

 

 

1,395,172 

 Comprehensive income (loss) attributable to noncontrolling interests

(46,039)

 

 

 

 

 

 

(46,039)

 

 

 

 

 

 

 

 

 

 

Net Comprehensive income attributable to common stockholders

$

827,654 

 

$

1,738,264 

 

 

 

 

 

$

1,349,133 




F-62




Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Operations and Other Comprehensive Income


A. To reflect the pro rata share (30%) of the historical earnings of Guangdong Tianmei to China Gewang for the year ended November 30, 2015.




F-63